Even Nostradamus can’t make a decent investment return this year
TOKYO: That even the French seer’s investments would struggle to beat US inflation this year is a bad omen for future returns, market observers say.
Not one of the 17 major asset classes tracked by Morgan Stanley has beaten US consumer-price index in 2018, a record going back to at least 2004, the bank’s strategy team including Matthew Garman wrote in a note Friday.
For the Leuthold Group, its hypo- thetical single-asset portfolio with “perfect year-ahead foresight” is set for the worst performance ever.
“Remarkably, this theoretically optimal portfolio has also fallen on hard times,” Doug Ramsey, Leuthold chief investment officer, wrote in a recent note, after tracking the performance of the best-performing asset each year from a collection of US and global equity and bond indexes.
“Unless REITs improve on their current year-to-date total return of 1.6%, the perfect-foresight portfolio will suffer its worst year on record.”
After a strong start to the year, risk assets tumbled around the world on a cocktail of concerns from the United States-China trade war to a slowing global economy and the impact of the Federal Reserve’s monetary tightening.
The S&P 500 Index is down 1.5% year-to-date, commodities have slumped almost 9% and the Bloomberg Barclays US Treasury Total Return Index has declined 1.4%.
For Ramsey, the problems began well before the year began.
The five-year annualised total return for his best-case portfolio is 15% , the lowest in modern history, he said.
This compares with an annualised return of about 34% from 1972 to date.
“Considering the reckless monetary experimentation conducted here and around the world in recent years, we’d have expected the perfect-foresight portfolio to have at least hit a home run, if not a grand slam,” he wrote.
“The failure of even the ‘clairvoyant’ portfolio manager to score in recent years suggests the long-predicted period of low returns has in fact been underway for some time.” — Bloomberg