For the week ending Friday, 13th June stocks markets broadly declined after several weeks of growth, with returns ranging from +0.58% to -1.31%. We believe the insurgency in Iraq drove markets broadly lower. Economic data for the week was largely as expected in our view. REITs were relatively weaker than most other asset classes this week falling between -1.06% and -2.29% after a strong run in recent months. Fixed income returns ranged between +0.17% and -0.32% reflecting our belief in the the ability of fixed income assets to generally counterbalance periods of stock market weakness.
Militants have occupied large areas of Iraq, the world’s 6th largest exporter of crude oil. As a result, the prospect of reduced oil supply appears to have driven oil prices to their highest level in several months. We believe this is the primary cause of market weakness this week. However, there are over 30 conflicts in the world currently, from the Mexican drug war to insurgency in Nigeria. There have usually been between 20 and 50 conflicts every year since the end of the Second World War, and against this backdrop stocks have typically delivered growth of approximately 6% a year on average. Therefore, our research suggests the best strategy is to remain invested, rather than attempting to time the markets based on any specific geopolitical event.
Also, a reminder to take a moment to review the risk tolerance for your portfolio. You can set this on your asset allocation page on our site. As your time to retirement decreases, we automatically adjust your asset allocation for you, giving you an asset allocation that we believe will reduce risk as retirement nears. However, your risk tolerance provides an additional layer of adjustment on top of this, should you wish to take a potentially more aggressive or more conservative approach. So as you adjust your risk tolerance setting remember that it is in addition to the automatic age-related portfolio adjustments that we make for you.
*The FutureAdvisor performance calculated is net of fees but before trading costs. Differences in account size, age of clients, risk tolerance, timing of transactions and market conditions may lead to different results. Past performance is not indicative of future results.