September proved to be a great month for almost all assets. The triggers being a slew of good news flowing through: non-tapering, the likelihood of Yellen taking over and not Summers, and Merkel prevailing. The global markets rebounded sharply in September, with most of the major asset classes posting handsome gains. The main exception: broadly defined commodities, which retreated nearly 3%. Otherwise, there was a bull-market party across the board at the finale for the third quarter, led by a potent 8.6% rise last month in foreign real estate/REITs. In fact, foreign assets in unhedged US dollar terms generally fared quite well in September, including a strong revival in emerging markets equities, which advanced 6.5%--the best month for this slice of global equities in more than a year. Unsurprisingly, the Global Market Index—an unmanaged, market-weighted benchmark of all the major asset classes—earned a handsome gain in September, rising 3.9%. That’s the best monthly increase for GMI since January 2012.
The revival in asset prices last month looks impressive, marking a contrast with the red ink of August. On a year-to-date basis, however, the results are mixed, with an even split between losses and gains for the major asset classes (excluding cash, which continues to tread water in the land of zero returns). Nonetheless, GMI’s 8.9% rise so far in 2013 through September’s close is a strong advance for a broadly diversified mix of everything. For the moment, at least, Mr. Market’s asset allocation is still a tough act to beat.
The one month figure is good to monitor but what is more significant is the YTD figures which gives a better grasp of the prevailing trends. Look at the top gainers on a YTD basis, they were US stocks and Foreign developed equities ... a significant trend to stay in developed markets. This may already be a deep trend this year to stay away from emerging markets, which may further lend clarity to the sell down in BRICs over the last few months. In generalised tones, the trend is not reversing yet, which would means that the dangers and risks attached to being invested in emerging markets and their currencies are still "high".