And the Winner is… Commodities?

June 01, 2018

Through the end of May, 2018 has featured volatility and uncertainty across financial markets leading to some disappointing performance. Fixed income investments struggled as the yield curve rose with both core bonds and high yield slightly negative year to date. Broad U.S. equities are only up 2.5% after a rocky start to the year while international equities are negative following an exceptionally strong 2017. All this, along with fears about inflation, led to a surprising result: commodities are the best performing asset class in 2018. Despite this, the asset class is still by far the worst performer over both a 5 and 10-year period.

This week’s chart shows how difficult it is to time the market and why maintaining a consistently well-diversified portfolio is so important. The argument could be made that commodities were due to outperform (i.e. buy low and sell high) given their recent struggles. However, in 2014 commodities were down over 33%; investors hoping for a nice rebound the following year were in for a shock as commodities fell another 32.9% in 2015. On the flip side, last year emerging market (EM) equities was the top performing asset class, but those looking to chase this return now find themselves in the worst performing asset class YTD. There is little correlation between returns year to year and therefore we encourage clients to stick with long term allocations and avoid portfolio decisions based solely on recent returns.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.