Equities: The Anomaly That Was 2017
Let’s face it, the performance of equities to the upside last year was a surprise by just about all accounts. And downright baffling at times. For example, on November 28, 2017 North Korea launched a missile and the Dow settled the day at record highs. But as we closed the books on last year and have begun looking forward through 2018, the question is: Can it continue? Will it continue?
The world’s largest mutual fund company doesn’t think so. In a recent article (Bloomberg, September 20, 2017) Vanguard’s Nathan Zahm said investors should brace for a decade of “muted returns”, reiterating their view that while 2017 has been a surprise to the upside, equity returns will drop to 5 to 8 percent per year, and bonds will decline to 2 to 3 percent. Vanguard then weaken its outlook further for stocks next year, forecasting U.S. stock returns of 3 to 5 percent (Bloomberg, December 4, 2017).
In a recent commentary published by Blackrock, Inc. (August 21, 2017) their five-year asset class return expectations show equity returns ranging between 4 to 7%.
Look To Managed Futures For Stability and Growth
Portfolios that include managed futures funds may perform better and reduce risk more than those without them, according to research published by the Alternative Investment Management Association (AIMA), the global representative of alternative investment managers, and Societe Generale.
Managed futures are professionally managed accounts, managed by registered professional traders, that can go long or short commodities, stock market indices, foreign currencies, and international interest rates. They take a global outlook on the markets, and apply their strategies on approximately 150 futures markets that trade on regulated exchanges around the world.
As an asset class, managed futures are not dependent on stocks or bonds going up in order to succeed. With the ability to go both long and short, managed futures have the potential to profit in any kind of economic environment – including declining equity markets.
Source: Standard & Poor’s and BarclayHedge. The information presented above is for informational purposes only. It is not possible to invest directly in an index. Past performance is not indicative of futures results. Investments in commodities, managed futures and other alternative investments involve a high degree of risk and performance can be volatile.
Managed Futures Characteristics
The potential to increase returns while reducing volatility
Managed futures offer a smart way to balance returns with risk. When added as a component to a traditional stock and bond portfolio, managed futures have historically displayed characteristics which help reduce overall risk and volatility while simultaneously enhancing performance.
Diversification beyond stocks and bonds
Managed futures have virtually no correlation to traditional asset classes such as stocks, bonds, cash, and real estate—making them a powerful diversification tool.
Investment flexibility during up and down markets
Managed futures have the potential to limit losses and generate strong returns even when stock markets are falling or in crisis. During periods of economic stress—inflation, deflation or recession—managed futures can take long or short positions to capture positive returns.
The managed futures sector has grown nine-fold since 2000, reaching $340 billion in assets under management at the end of 2016, according to BarclayHedge. Most recently, managed futures funds recorded a $10.4 billion net inflow in Q2 2017, according to Preqin – the largest inflow of any hedge fund strategy.
As we turn to corner into 2018, be on the look out for ways to diversify your investment portfolio and manage your risk. Managed futures is one way. Learn more today.
David P. Pankiw
Call: (312) 273-4055
This report does not constitute an offer to sell, or a solicitation of an offer to buy or sell, any commodities interests, managed futures accounts or securities, and is intended for informational purposes only. Any offer for any investment product will be made solely by the appropriate disclosure document or offering memorandum. The PRICE Futures Group, Inc. does not make any representations as to the accuracy or completeness of any data or information contained herein and such information should not be relied upon as such. Some data and information presented in this report may have been obtained from outside sources. The PRICE Futures Group, Inc. makes no claims as to the accuracy or completeness of this information.
Investments in commodities, managed futures and other alternative investments involve a high degree of risk and performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Investments in commodities, managed futures and other alternative investments are often executed on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Past performance is not indicative of futures results.
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