Widespread selling in the major asset classes rolled on in last week’s trading through Friday’s close (Apr. 22), based on a set of ETFs. The upside outliers: US real estate investment trusts (REITs) and inflation-protected Treausuries.
Vanguard US Real Estate (VNQ) rose 0.9%, delivering a scarce gain for markets last week. The fund continues to trade in a range, but is hinting at possibly breaking higher as investors eye assets with relatively high payouts as elevated inflation risk roils market sentiment generally.
REITs are “a strong inflation hedge, with sub-industries that issue short-term leases able to adjust quickly to rising prices,” advises Sam Stovall, chief equity strategist at CFRA, in a recent research note.
Inflation-protected Treasuries also rose last week. The iShares TIPS Bond ETF (TIP) edged up 0.2%, the fund’s first weekly gain in six weeks. Nonetheless, it’s not obvious that the recent slide in TIP has run its course and so the downside bias still appears to be intact.
The rest of the major asset classes fell last week, extending the recent run of selling for most of the global markets. Sentiment continues to take a hit from elevated inflation risk and expectations that the Federal Reserve will be forced to raise interest rates more aggressively than previously forecast.
“The dramatic shift in ECB/FOMC tightening expectations last week remains a huge overhang, but China is quickly rising the top of the list of market fears as COVID shutdown concerns spread to Beijing,” advises Adam Crisafulli of Vital Knowledge in a note sent to clients.
The Global Market Index (GMI.F) fell for a third straight week, tumbling 2.5%. This unmanaged benchmark, maintained by CapitalSpectator.com, holds all the major asset classes (except cash) in market-value weights via ETF proxies.
For the one-year window, commodities continue to lead by a wide margin. WisdomTree Commodities (GCC) is up nearly 33% over the past 12 months, far ahead of the rest of the field.
Most of the major asset classes continue to post losses for the trailing one-year period. The deepest slide: foreign corporate bonds via PICB, which is down more than 17% vs. the year-ago level.
GMI.F is currently 4.9% below its price from a year ago on a total-return basis.
Slightly more than half of the major asset classes posting deeper drawdowns than GMI.F. The steepest peak-to-trough decline at last week’s close: government bonds issued in emerging markets via EMLC, which closed more 24% below its previous peak.
The smallest drawdown at the moment: US REITs (VNQ), which closed on Friday at 4.9% below its previous peak.
GMI.F’s current drawdown: -11.3%.
