The week ending June 6, 2014 saw continued strong growth in most stock markets with good news in both the US and Europe. The European Central Bank cut interest rates to a record low to spur growth. The US saw strong job growth and the absolute number of jobs is back to its 2008 pre-recessionary peak. As a result all the broad stock funds we recommend are up at least 1% this week, with particular strength in emerging markets with growth of +2.16% to +2.98% and US small cap stocks growing +2.66% to +2.85%. REITs (real estate) both domestic and international were also in positive territory ranging from +0.69% to +1.87%. The positive news about growth on both sides of the Atlantic caused a decline in most fixed income funds with returns ranging between +0.23% and -0.87%.
For 2014 through to the end of May FutureAdvisor’s average Premium portfolio return has been 5.90%* relative to 4.03% for the S&P 500. This represents outperformance against the S&P 500 of +1.87%*. The year so far has highlighted the value of our 12 asset allocation model with different asset classes performing particularly well each month. In January fixed income outperformed most stock indices. February and March showed the benefits of international diversification as various major foreign stock indices outperformed the US market. April saw high returns to real estate. Most recently, May saw emerging markets showing strong growth.
As you can see, in each month a different theme has emerged, but our diverse asset allocation positions our customers to take advantage of growth where it emerges, while managing risk through diversification. We believe the automatic rebalancing we provide for Premium customers helps performance further as we take advantage of volatility to rebalance, often buying funds at relatively attractive prices when they are temporarily out of favor.
*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.