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November 1, 2016

Widespread Selling in Most Asset Classes

By James Picerno, Capital Spectator

The major asset classes lost ground last week, with one exception: foreign high-yield bonds. Otherwise, red ink dominated the broad categories of global markets for the five trading days through Oct. 28, based on a set of proxy ETFs.

The only slice of markets that escaped (just barely) last week’s red-ink fest: the iShares International High Yield Bond ETF (HYXU), which posted a fractional gain of 0.02%.

The rest of the field fell, with US real estate investment trusts taking the biggest hit. Vanguard REIT (VNQ) tumbled a hefty 3.6%, pushing the fund to a five-month low.

The negative bias in last week’s trading weighed on an ETF-based version of the Global Markets Index (GMI.F). The investable, unmanaged benchmark that holds all the major asset classes in market-value weights lost 0.8% over the five trading days through Friday.

In the one-year column, the return profile still reflects an upside bias, with most asset classes posting gains.

The current top performer: emerging-market fixed income. Van Eck Vectors JP Morgan Emerging Market Local Bond (EMLC) is ahead by 10.1% in total return terms for the year through Oct. 28.

Meantime, commodities continue to languish as the biggest loser for one-year results. The iPath Bloomberg Commodity ETN (DJP) is off 2.3% for the trailing 12-month period. Note, however, that this modest setback is relatively light in comparison with recent history. As the chart below shows, DJP’s current one-year decline (blue dot at far right) is comfortably above the interquartile range of one-year losses since 2013 (gray box).

For context, keep in mind that GMI.F’s total return is a modest 3.2% for the trailing one-year period as of Oct. 28.

About the Author - James Picerno is a veteran financial journalist since the early 1990s at Bloomberg, Dow Jones, etc. before becoming an independent writer/analyst/consultant in 2008. James is also the author of Dynamic Asset Allocation (Bloomberg Financial, 2010) and he writes at The Capital Speculator(Author Archive here)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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