Research
Investment Advisory/Asset Management Accounts custodied at:
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| Snapshots in history that help tell the story of asset class rotation since 1990. |
Early 1990s In 1991 investors were trying to regain their footing after experiencing the worst year for the S&P 500 Index in 1990 since 1981. In fact, the decline in 1990 was the first down year for the market since 1981. While a decline of -3.2% will elicit very little sympathy from the modern investor it it worth noting that the year of 1990 was the only down year for the S&P between 1981 and 2000. And so 1991 was, in relative terms, a recovery year for the US equity market and by March the Domestic Equity asset class had achieved the top RS ranking and would hold that for more than 2 1/2 years. It had also grown to 25% of the allocation, a level it would not dip beneath until late-1998. In April 1991 (shown, left) the asset class had garnered 27% of the allocation, with it and Int'l Equities comprising more than half of the overall allocation. |
Mid 1990s In January of 1995 the Domestic Equity asset class became the top-ranked group, by June of 1995 it occupied 30% of the allocation. Both of those things would remain true until August 1998 and along the way the group would at times maintain a weighting as high as 37% based upon the RS signals captured. The snapshot in mid-1996 shows a very aggressive allocation, one that would indeed become even further skewed toward "high beta" assets, but for good reason, it was a performance trend that continued for years. The 37% weighting for US equities achieved in late-1997 was more than we've seen any other asset class "capture" in either of our study periods. |
2000 - 2002 While the 25% allocation was something the US Equity asset class rarely slipped beneath in the 1990's, by October 2000 this investment category would slip beneath that level for almost 3 years. The snapshot in April 2001 certainly doesn't represent the extreme, but shows how defensive the flexible allocation was heading toward 9-11 and a market decline of more than 20% in 2002. US Equities were just 10% of the allocation and Cash was 20% and would stay above 20% for more than a year. Speaking of 2002, the Domestic Equity weighting would not climb above 10% at any point in 2002, and would become as little as 3% of the portfolio, the lowest point on record. |
2003-2007 After the carnage of 2000-2002, which served as a cataclysmic event for most and the worst market since the 1970s, rotation became evident in the RS data in early-2003 as the 2nd Iraq War was beginning. Commodities maintained evidence of strength and leadership, and US Equities return to sound footing by June 2003 as high beta assets had returned to occupy more than 60% of the flexible allocation. Between US Equities, Int'l Equities and Commodities, one of those three would be the largest weighting in the portfolio from 2003 until August 2008. Int'l Equities would be one of the top two investments until January 2008. |
2008 We've written a great deal about 2008 and won't belabor this period other than to say that while Commodities provided leadership for the first half of 2008, its weighting had fallen from its highest level in history (32%) as Crude was hitting $147 per barrel, to 20% by August 2008. Domestic and Int'l Equity assets combined for just 22% of the allocation, and thus the "high beta" assets represented well under 50% of the overall portfolio heading into what would be a horrific few months for these markets. |
2009 - present While some aspects of equities and commodities found lows in late-2008, the bottom in the broad equity markets came in March 2009 and by April 2009 the International Equity asset class was the top-weighted group, with Commodities the 2nd highest scoring group by May 2009. In June 2009 a "flexible" allocation would find itself with nearly 70% of exposure dedicated toward "high beta" investments, a number that would remain above 50% for more than two years. |
