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Joshua Street

Market Commentary

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Key Observations:

  • January was a strong month for most asset classes, with continually low volatility at unprecedented levels.
  • February was a totally different story, as volatility came back with a vengeance. All asset classes lost value across the board, stemming from sharp drops early in the month, followed by a muted recovery that tailed off by the end of the month.
  • Although long-term momentum for most asset classes is currently still positive, the shifting short-term momentum may be foreshadowing for what’s to come in the coming months.
  • As of the end of January, most major asset classes remained at expensive long-term valuation levels, potentially indicating reduced future performance over the coming 7-10 years. February’s market declines may have made some of these asset classes slightly more attractive from a valuation perspective, but there’s a lot more room for them to decline further and become significantly cheaper.

Source: Morningstar Direct daily total return data for SPY, EFA, EEM, AGG, TIP, DBC, GLD, & ICF

 

Source: Morningstar Direct daily total return data for SPY, EFA, EEM, AGG, TIP, DBC, GLD, & ICF

 

Source: GMO 7-Year Asset Class Real Return Forecasts as of 11/30/2017, Research Affiliates Asset Allocation Interactive Data as of 11/30/2017

 

Source: GMO 7-Year Asset Class Real Return Forecasts as of 11/30/2017, Research Affiliates Asset Allocation Interactive Data as of 11/30/2017

 

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The commentary on this website reflects the personal opinions, viewpoints and analyses of Joshua Street and should not be regarded as a description of services provided by his employer or its affiliates. The opinions expressed in this website are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide general education about the financial industry. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Any indices referenced for comparison are unmanaged and cannot be invested into directly. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.