For the last several 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 Q2 2018 for those of you that are interested (see below).

2018Q2 Asset Class Performance

A few callouts from the data:

• Q2 was led by REITs (Real Estate Investment Trusts) (~+9%) with weakness in emerging market stocks and bonds (~-10% and ~-12% respectively) on weak currencies, fiscal issues (too much debt), the impact of a potential trade war with the US, and political instability.  This is par for the course with emerging markets…  when they’re hot they’re hot as that’s where much of the world’s growth comes from.  But when unstable political systems and fears of a slowdown hit, they can take a hit quickly.  Notably, Q1 performance was the exact opposite of Q2 with respect to emerging markets and REITs.  EM stocks and bonds led all asset classes and REITs were the worst performers.  Yet another signal that past performance, especially over the short-term, is not indicative of future results.
• While everyone would love to see all asset classes moving up, a well functioning market has some dispersion in asset class performance.  The fact that US stocks can rise while emerging markets fall sharply in a quarter is sign (at least for now) that a 2008-like meltdown is not on the horizon.
• The Fed raised rates again in Q2 at their June meeting, continuing the once-per-quarter hike trend that they’ve set for the market.  The Fed Funds rate target is now 1.75-2.00%.  Futures markets are pricing in a ~90% chance of at least one more hike this year and a ~55% chance at two.  While increasing rates put pressure on bond prices, the advantage of shorter term bond funds is that they mature quickly and are replaced by new, higher paying bonds.  As a result, US aggregate bonds are now yielding ~3.25%, with short-term corporate bonds not far behind at just over 3%.  Emerging market bonds (in local currency) are yielding a whopping 6.5%.
• Not much has changed from last quarter’s 5-year chart.  Commodities are still deep in the red due to big losses in 2014 and 2015.  US stocks continue to be the outperformers, with rest of the world lagging behind and trying to play catch up.