For market timers this is a difficult period. Many stock investors are worried about a pullback from the new high water mark. Bulls have been badly burned twice in the past thirteen years as the market pulled back hard in 2000 at the height of the tech bubble and again in 2007 when faced with the financial crisis. Bond investors, after a 32-year bull market, are now worried about low interest rates turning into potential losses if interest rates begin to rise.
For long-term diversified investors the markets are very rewarding and much less stressful. If you stayed invested and tuned out all of the market noise, your diversified investment portfolio likely grew again in April. In our chart below we recap the monthly and the trailing twelve months numbers.
International stocks from developed countries lead the charge in April returning 5.21 percent after many months of underperformance. Companies from emerging markets continued to lag returning a meager 0.75 percent for the month. The S&P 500 continues to be a bright star with a 1.93 monthly return. For the trailing 12 months, U.S. stocks have fared well as the S&P 500 is up 16.89 percent.
The investment grade bond market looked like it was beginning to show some cracks after an amazing 32-year run, but a weak March employment number and hints of continued slow economic growth gave bonds a second wind. In April, long-term U.S. Treasuries lead the way with an astounding 4.00 monthly return. The other sectors of the bond market (corporates, high yield, mortgage-backed securities and intermediate Treasuries’) generated returns around the 1.00 percent level. Bonds are not going to duplicate performance from the past ten years, but they will continue to provide income and general price stability to a diversified investment portfolio.
Our best advice for clients is to stay invested while owning a diversified portfolio of stocks, bonds and a touch of commodities. Unfortunately, we do not know the best performing asset class for next month, next quarter or the next year, but the long-term investor with a diversified portfolio will allow themselves the opportunity to participate in the entire market. Don’t be a bull or a bear, just be invested.