Q4 2017 Returns By Asset Class

For the last few quarters, I’ve posted returns by asset class (by representative ETF), as well as year-to-date, last twelve months, and last five years. While there is still no predictive power in this data, I updated those charts as of the end of Q4 2017 for those of you that are interested (see below).  Note that there is no year-to-date chart in this quarter since year-to-date and last twelve months are the same.  Instead, I just included one Full-Year 2017 chart.

2017Q4 Asset Class Performance

A few callouts from the data:

  • All asset classes displayed finished positive for 2017.  International markets led the way with emerging markets up 33% and developed foreign markets up 28%.  About 10% of this gain, is due strictly to currency fluctuations as the US Dollar finally took a breather vs. most foreign currencies in 2017.  That makes foreign holdings worth more in US dollars and juices returns a bit, offsetting some of the dollar gains / foreign losses in recent years.  Local currency emerging market bonds were up 15% for the year, due in part to the same currency impact.  As can be seen on the 5-year chart, foreign markets have a lot more catching up to do vs. the US, though there’s no way to know when that’s going to happen, or if the gap gets wider before it eventually starts to narrow.
  • US stocks continued their solid run with large caps up ~22% and small caps up ~17% on the year.  While those numbers aren’t extraordinary from a historical perspective, the lack of volatility was.  For the first time in the history of the S&P 500, all twelve months of the year had positive returns.  Don’t expect that to happen again, but if you think 20%+ returns usually means no chance of good returns the following year, you’d be mistaken.  The S&P 500 was up 20%+ 18 times since 1950 and in 16 of those times, the following year was higher (per LPL Research).
  • Bonds (short and medium term) had another positive year despite three more interest rate hikes by the Fed.  The Fed Funds rate target is now 1.25-1.50%.
  • Commodities (energy, metals, agricultural products) finished the year positive and are up substantially from their bottom in early 2016.  However, the oil crash really took its toll and as such, aggregate commodity funds are still down ~40% over the last 5 years.