Robert Arnott: Too far too fast?
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July 17th, 2009 by AdvisorAnalyst
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In his latest newsletter, Robert Arnott, founder of Research Affiliates, and innovator of FTSE-RAFI(tm)Fundamental Indices, asks the question “Too far too fast?,” and provides a comprehensive analysis of the market and his outlook. Here is an excerpt:
The tremendous comeback in financial assets that began in March and extended through the second quarter of 2009 has proved a welcome relief to investors of all types, a blessed batch of showers for our drought-ridden portfolios. The classic 60/40 stock (S&P 500 Index) and bond (BarCap Aggregate) mix advanced 10.2%, experiencing its third best quarter since 1988. As we predicted coming into 2009, in a broadly diversified GTAA context, some of the most dislocated credit categories from last fall-high-yield, emerging market bonds, convertibles, and bank loans- were some of the biggest winners in the fi rst six months of 2009 as all four dramatically outperformed mainstream stocks and bonds.
Undoubtedly, most portfolios are still well underwater (60/40 is still down 21% from its October 2007 high) and likely have many years of catch up. But the respite has allowed investors to assess their portfolios and begin to make asset allocation decisions with an eye toward the future. A thorough exercise of asset class valuations reveals that many once beleaguered asset classes may have come too far, too fast in this recent rally. Accordingly, now is likely a time to take profi ts and to resume our cautious vigilance of 2008.
Read the whole newsletter here.
Hat tip: Investment Postcards
Read more from the author/contributor here.
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