But what have markets done for me lately

Sam Swift, CFA, CFP®, AIF®

Aug 4, 2016

By Sam Swift, CFA, CFP®

We’re now more than seven months into the year, so I don’t think it hurts to check in on how various markets have performed in 2016. With the normal caveats—none of this means anything as far as actionable information for the future; the first seven months of 2016 is an extremely short-term, arbitrary time frame—I still think it can be interesting to examine what has happened.

Asset Class

It turns out it’s been a good year thus far for most asset classes. It’s interesting to note that Global Real Estate, US Small Cap Value, and Emerging Markets stocks have outpaced everything else. You tell me what those three have in common (answer: nothing—it’s random). What sticks out to me most is that International stocks have done relatively poorly, although even International Small Cap is on pace for a positive year. Most of this, especially in the large cap space, is likely due to fears stemming from Brexit. Some would say there are concerns about global growth in general, but obviously those concerns aren’t translating into poor performance in Emerging Markets or Real Estate which are, of course, still part of the global markets.

The last few years it has been tempting to question the inclusion of international stocks in our portfolios, but the recent situation where the U.S. is the best performing market is actually quite rare. Here are the year by year rankings of developed countries for the last 25 years:

Rankings of Developed Country

And here is the same chart (including 2015) with the U.S. highlighted for effect:

U.S. Highlighted for Effect

In fact, 2013 and 2014 were the only two years of the past 25 when the U.S. markets outperformed all other developed markets. The U.S. is a very significant part of a stock portfolio (most of us live in the U.S. after all), but it still represents only about half of the global market opportunity set.The one other tidbit worth pointing out is that value stocks have bounced back relative to blend and growth stocks. You can see that For US Small Cap, US Large Cap, and International Small Cap, the value index has outperformed the general index for the year. This follows several years of relative underperformance for value stocks, but is what we would generally expect given enough time. Just like stocks will underperform bonds over shorter time periods, value stocks will underperform growth stocks over shorter time periods; and just like we expect stocks to outperform bonds over longer periods of time, so too do we continue to expect value stocks to outperform growth stocks over time.

Value Growth Stocks

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