Monthly Asset-Class Scoreboard – The Defensive Team has Stepped onto the Field

February 6, 2014

scoreboardIt has been awhile since I last updated the asset-class scoreboard.  For most of 2013 the top spots were occupied by large-cap growth, Nasdaq 100, and small-cap stocks.  How quickly things can change.   Since the January 15 price high at 1850.84 the S&P 500 fell 4.32% to a low of 1770.45 on January 29th.  What’s interesting about that is by declining past January 27th, the correction exceeded the duration of every correction since June of last year.  Of course the price has further declined into February making it now the longest correction since October/November 2012.

As a result of this, the three top ranked asset-classes at month end were all fixed-income related – investment grade corporate bonds, high yield bonds, and preferred stocks.   Whether this is just a breather being taken by the offensive team remains to be seen.  For now, the market is signaling that the best offense might be having a good defense.  In fact, some of Portfolio Cafe’s systematic ETF models have begun to work in defensive bond positions in classic “risk off” fashion.

Precious metals, despite recent signs of potential bottoming, remain entrenched at the bottom of the ranking, a spot occupied for eight months in 2013.  Emerging Markets continue their descent in rankings, roiled by rising credit fears and currency devaluations.

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