I talked about a high possibility that the world stock market will continue to rally after the Dow Jones Index has reached historical high. This prediction seems to be still holding out. The world markets pushed upwards with many markets attaining new historical high.
The Lessons from May 10It has been 6 months since the market correction on May 10 occurs. During those days, the market is fearful of an economic slowdown due to excessive interest rates hikes. We have spoke of the horrors of the Asian Markets when it went on a freefall. Now that all these are over, we must now sit back and evaluate the lessons from that episode. The burning question is: Which Asset Class fell the most & Which Asset Class made most during this period of time?
Chart 1: Maximum Profits & Loss Since 10 May 2006
The Least Affected
Based on the Chart, the least affected in the correction is Bonds with a loss of -2.93%. Traditionally, bonds are the safe havens for market shocks. In this case, bonds turned in a negative returns due to the fact that the market was worried about further interest rates hikes. Bonds will not do well in a rising interest rates environment. In this case, non of the asset class made money during the worse period of 2006
The Most Profitable
The Lessons from May 10It has been 6 months since the market correction on May 10 occurs. During those days, the market is fearful of an economic slowdown due to excessive interest rates hikes. We have spoke of the horrors of the Asian Markets when it went on a freefall. Now that all these are over, we must now sit back and evaluate the lessons from that episode. The burning question is: Which Asset Class fell the most & Which Asset Class made most during this period of time?
Chart 1: Maximum Profits & Loss Since 10 May 2006
The Least Affected
Based on the Chart, the least affected in the correction is Bonds with a loss of -2.93%. Traditionally, bonds are the safe havens for market shocks. In this case, bonds turned in a negative returns due to the fact that the market was worried about further interest rates hikes. Bonds will not do well in a rising interest rates environment. In this case, non of the asset class made money during the worse period of 2006
The Most Profitable
The most profitable asset class during this period, is surprisingly, the property fund market. With much worries about a slowing US residential property markets and rising mortgage rates, the property market, should be the worse hit. Instead, it turned out the best performance. The rationale is due to the fact that the majority of the property market is actually comprises of commercial and industrial REITS where rents and land prices are still on the rise.
The Biggest WinnerAt the end of the day, which asset class is the best pick during this period of time? The answer is that Property Equity fund. They provided quite a good cushion in the face of market shock by losing only 8% compared to Asia and Oil which lost approximately 15%. Their returns do not fall short of the more aggressive Asia funds either during the pickup phrase. In fact, during the last few good years, whenever the stock market corrects, the property funds have been giving similiar performance. Property funds with it's defensive nature and modest capital gains, may outshine volatile equities or commodities over a long period of time, and deserves a place in every investors' portfolio.
In conclusion, I have came up with the following theory:
1) Economic Recession - Buy Bonds
2) Economic Recovery - Buy Equities
3) Post Recovery Economy - Buy Property
The Last Word
The Year End Rally looks unstoppable at this moment in time. Enjoy the ride up the bull curve.
The Biggest WinnerAt the end of the day, which asset class is the best pick during this period of time? The answer is that Property Equity fund. They provided quite a good cushion in the face of market shock by losing only 8% compared to Asia and Oil which lost approximately 15%. Their returns do not fall short of the more aggressive Asia funds either during the pickup phrase. In fact, during the last few good years, whenever the stock market corrects, the property funds have been giving similiar performance. Property funds with it's defensive nature and modest capital gains, may outshine volatile equities or commodities over a long period of time, and deserves a place in every investors' portfolio.
In conclusion, I have came up with the following theory:
1) Economic Recession - Buy Bonds
2) Economic Recovery - Buy Equities
3) Post Recovery Economy - Buy Property
The Last Word
The Year End Rally looks unstoppable at this moment in time. Enjoy the ride up the bull curve.
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