The first quarter delivered good news and bad, but nothing that would derail equity markets from their pursuit of new highs.
Though bonds outperformed equities in the quarter, positive performance was broad-based.
Resurgence in the manufacturing sector — driven in part by the monumental gas boom — is finding its way into corporate profits.
The more acute issues in the emerging markets have eased, fueling a V-shaped comeback by their equity markets.
While recent equity pullbacks have provided under-exposed investors with attractive opportunities to re-enter the market, many remained spooked by memories of 2008.
Risk has remained low in a virtuous cycle where good news is accepted as good news and bad news is quickly discounted.
Many emerging economies have struggled this year, but they are generally better positioned to withstand a currency assault than they were in 1997.
A plan that effectively balances building wealth and controlling risk better positions investors to pursue their goals in all seasons.
- The Fed is handing the baton to back to the markets for pricing risk, sending volatility higher on its path back to normal.
- Emerging markets health is vital to global growth, as they have doubled their contribution to global GDP over the past decade to nearly 40%.
- S&P 500 corporations derive half of their revenue from overseas; global consumerism and manufacturing provide ongoing support.
- Broad global diversification across equity and fixed income markets is the best way to protect against volatility.
- While the U.S. market was dominant in 2013, broad global equity diversification contributed to positive investment returns.
- Surging equity markets were an example of “upside risk” that hit some investors hard in 2013.
- Effective diversification should be meaningfully global within equity and fixed income, distributed broadly across asset classes and rebalanced on a periodic basis.
- If you invest like everyone else, you likely will experience the same sub-par returns that everyone else does.