When looking at Asset Classes….

When looking at Asset Classes….

An asset class is a group of investments that have similar characteristics, are subject to the same laws and regulations, and generally respond similarly to market fluctuations.

Asset Classes Evaluation

When markets go awry, as they have so far this year, it’s hard to hide in equities. According to S&P Capital IQ, every sector of the market is down so far this year, with metals and mining sinking the most, at –22 percent. None the less, after looking at cumulative returns (or losses) and correlations over a specific period, one may decide to take a look to at their history of drawdown and subsequent returns. The following tables are produced with Jupyter and Plib using historical end-of-day data spanning the last ten years (if available).

Global Stocks

The performance has been low/scarce when comparing with the S&P 500 Index but including global equities as part of a diversified portfolio still makes sense.

asset classes
asset classes
asset classes

Global Macro

Global Macro includes themes typically employed by a hedge fund or mutual fund that picks its holdings through informed notions about various countries’ macroeconomic and geopolitical developments.

asset classes
asset classes
asset classes

Smart Beta

Smart Beta strategies focus on factors that have historically been persistent drivers of returns across equities and other asset classes; it is at the intersection between traditional value investing and the efficient market hypothesis. Basically it attempts to achieve three objectives (or a combination): Low-risk investments, Alpha, High diversification at low cost

asset classes
asset classes
asset classes

US Sectors

Sector rotation is the process of selling out of sectors when the economic cycle suggests that their sector may not perform well, and then allocating those investable assets into sectors that are likely to perform better on a relative basis when that economic cycle suggests it

asset classes
asset classes
asset classes

EU Sectors

asset classes
asset classes
asset classes

Currency Rates

Currencies do not naturally exhibit a risk premium that warrants investment consideration; the return on currencies tend to be zero in the long term (unlike stocks and bonds), given that real exchange rates should converge to a natural equilibrium. However, currency overlay has become a well-established technique for adding incremental gains by increasing and decreasing currency hedges at the appropriate times.

asset classes
asset classes
asset classes

Transport

The Baltic Dry Index is a shipping and trade index created by the London-based Baltic Exchange. It measures changes in the cost of transporting various raw materials, such as coal and steel. These indices are estimates of moving cargoes of raw materials across the seas by leading shipbrokers and are used in the freight derivatives industry. They are used to settle physical contracts as well as derivatives based on those contracts.

asset classes
asset classes
asset classes

Alternatives

Alternative asset classes describe assets that exist outside of the scope of traditional investments, income, or cash classes. For example, private equity, private REITS or limited partnerships, real estate, private debt, structured notes, principle protected notes or equity linked notes. Alternative investments can sometimes carry a higher risk than public markets an due to their alternative nature, these investments may be less liquid than their traditional counterparts and may require a longer investment period before any material value is realized.

asset classes
asset classes
asset classes

Commodities

Commodities are the basic building blocks of the global economy and are ordinarily split into two varieties: Hard commodities (metals or energy resources, mined or extracted from natural resources) and Soft commodities (agricultural, farmed or grown; tend to be seasonal, and prone to spoilage). Commodities are far more dangerous investments than stocks, shares, or even real estate. The prices are incredibly volatile. They can spend years, even decades, in terrible bear markets; however, commodities outperform other asset classes during high inflationary periods

asset classes
asset classes
asset classes
asset classes

References

EOD Historical Data. https://eodquotes.com

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