I was looking through some of my performance spreadsheets and was surprised by some of the movement going on under the relatively flat surface. There have been some sneaky movers that I wasn’t really aware of. So I figured I’d share a few interesting observations:
- Commodities are on a tear this year, led by gold & oil
- EM stocks are doing pretty well as are credit bonds
- Small caps are actually doing better than large companies (very recent development)
- Developed international stocks are flattish
- Dollar is down quite a bit giving back some of the huge gains made in 2014-15
Style box – after getting battered last year, mid and small cap stocks are outperforming (particularly on the value side). Note that this chart uses S&P indices, not Russell 2000 – thus the discrepancy with the above table. In fact, Russell 2000 has been a very poor way to invest in small cap compared to most other benchmarks!
Sectors & Industries
- Some material and energy groups are killing it this year. Make sure you look at the 5-year return numbers before coming to any conclusions – even with 89% rally GDX is still at negative 13% a year!
- Another trend is outperformance of “yieldy” groups – utilities, MLPs and mortgage REITs. Again, be careful not to chase yield for the wrong reasons.
- Former highflyers in Biotech & Internet are sitting this one out
- Solar is being solar – extreme swings one way or the other
- Battered Latin American markets are making a comeback
- As are energy play such as Russia, Canada & Norway
- Even Greece is showing some signs of life (don’t hold your breath on that one)
- China & Japan are at the bottom of the pack for country-specific reasons
Overall, the theme this year seems to be mean reversion. Formerly hot investments are taking a break, while there is some bargain-hunting in the beaten down areas.