Emerging-market stocks topped the performance ledger last week, based on a set of ETF proxies for the major asset classes. The gain (in unhedged US dollar terms) marks the sixth straight weekly advance for this slice of the world’s equity markets.
Vanguard FTSE Emerging Markets (NYSE:VWO) posted a 1.2% total return for the five trading days through Aug. 5. The solid advance was well ahead of the number-two performer, US junk bonds via SPDR Barclays (LON:BARC) High Yield Bond (NYSE:JNK), which climbed 0.5% last week.
Last week’s big loser: US real estate investment trusts (REITs), which tumbled 2.3%. The hefty decline for Vanguard REIT (NYSE:VNQ) is the first weekly loss for the fund since late-June. Profit taking after a strong run is probably a factor for last week’s loss. But a renewed focus on interest-rate hikes by the Federal Reserve in the wake of Friday’s strong employment report for July may be a headwind too. If the Fed announces another round of tighter monetary policy at next month’s FOMC meeting, interest-rate-sensitive securities such as REITs may be vulnerable.
Although REITs were in the performance doghouse last week, the asset class continued to hold the top spot for the trailing one-year period. VNQ’s total return was more than 20% for the year through Aug. 5, nearly double the gain for the number-two performer, SPDR Barclays International Treasury Bond (NYSE:BWX), which targets government securities in developed markets ex-US.
Meanwhile, broadly defined commodities remained dead last among the major asset classes for the one-year-return category. The iPath Bloomberg Commodity Total Return Exp 12 June 2036 (NYSE:DJP) was off more than 9% for the 12 months through Friday.
Despite the downtrend in prices generally, data from Barclays shows that tactical bets targeting commodities have been on the rise this year. The Financial Times reports that
“investors have pumped more than $50 billion into commodities this year, chasing a recovery in oil prices while falling interest rates have increased the attraction of haven assets like gold.”
But Barclays analyst Kevin Norrish suggests that the tide may turn:
“Our price forecasts for key commodities like copper and oil suggest a flat to negative second half of the year, which is likely to encourage some net liquidation.”