Over the past decade, capital markets provided a very captivating story. The great recession and market turmoil were the major storylines for the opening chapter, while the closing chapter left investors riding the wave of the second longest bull market on record. Sandwiched in between were a multitude of highs, lows and firsts. It included unprecedented government intervention, record low interest rates, sovereign downgrades, and eye opening political events; all culminating in solid returns for U.S. equities (Russell 3000 index +8.60%), and U.S. fixed income (Bloomberg Barclays U.S. Aggregate +4.01%) during the period.
This decade started with a year that no one will forget, 2008, the year that global markets were in a free fall, as investors felt the full wrath of the credit crisis. The “Credit Crisis” (August 2007 – February 2009) caused great losses in all equity markets. Most believe this recession was in direct relation to the housing market bubble. The OFHEO home price index reported its largest price drop in history; the average U.S. home price dropped more than 18% during this time. During 2008, the Russell 3000 was down 37.3%. Portions of the bond market were able to stay afloat as investors fled to safety. Notably, the Bloomberg Barclays U.S. Treasury: 1-3 Year index experienced a total return of +6.67% in 2008. This period affected many, not only capital market investors.
The next few years included a bounce back in markets, due to unprecedented government intervention in the form of guarantees, along with massive fiscal and monetary action, which helped stabilize the markets. Between 2009 and 2012, the Barclays U.S. Corporate High Yield bond index had a great four-year run, highlighted with a +58.2% return in 2009. U.S. equities (Russell 3000 index) finally recovered from the credit crisis in 2012, while international equities (MSCI EAFE) recovered in 2014, and emerging market equities (MSCI Emerging Markets) finally recovered in 2017. However, it wasn’t all roses during these middle years, as fear struck the debt markets between May 2011 and May 2012; Standard and Poor’s downgraded Treasuries and the Eurozone fought to prevent the collapse of the Euro, as some Eurozone nations faced bankruptcy.
2016 will be remembered as the year political events defied expectations. The rise of populism lead Britain to exit the European Union, while Donald Trump shocked the world by becoming the 45th President of the United States. Yields on Sovereign debt hit all-time lows and in some cases hit negative territory. Through all this political turmoil, equity markets remained resilient, as all the major equity markets finished in the black.
The momentum continued through 2017, as an improving global economy, and continued easy monetary policy offset global political unrest and gridlock over fiscal policy, as the bull market neared its ninth year. Emerging market equities, measured by the MSCI Emerging Market Equity index, lead the way with a +37.75% return, while global fixed income, measured by the FTSE Non-USD WorldBIG index, provided a +11.53% return for investors, during a year of record low volatility.
Below are the strategies that navigated the past ten years to make the PSN Top Guns of The Decade.
U.S. Equity Top Guns of the Decade
International Equity Top Guns of the Decade
High Yield Top Guns of the Decade
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Informa Financial Intelligence
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