With thanks to the eagle eyed Tracy Alloway, the year in asset class returns illustrated in shades of Deutsche Bank blue.
(Spoiler: not such a good year for gold, commodities, or A-Rod baseball cards).
Notable omissions for discussion: no room for Bitcoin, or Mayfair bolt-holes. And if hedge funds were an asset class the 7 per cent they have mustered this year would put them behind, well, pretty much every serious investment category.
But what has been going on? These two lines appear rather intimately related (although note the professional readjustment of scale on both sides to fit them together).
It’s hard to find an explanatory variable that better explains the rise in US equities since 2009 than the Fed balance sheet expansion. What perhaps confirms that the link is not coincidental is the fact (as shown in Figure 5) that equities (and indeed credit) have seen their weakest performance over the past 5-years in periods where the Fed balance sheet wasn’t expanding.
So, about that Taper…