Within stocks, the record was more mixed. A yen-hedged position in Japan proved a good call, with that market up more than 50% in 2013. However, I completely missed on emerging markets. While the stocks were cheap, emerging market growth slowed, not just in China but also in Brazil, India, and even in previously high-flying Mexico.
Fortunately, some of my equity underweights did better. In particular, my call to underweight utilities was the right call, as this “bond-market proxy” was the worst performing sector in 2013 (although in a year like 2013, even the worst performing sector is up double digits).
My fixed income calls proved generally correct, as bonds massively underperformed stocks and investors did well if they focused on high yield, rather than Treasuries and Treasury Inflation-Protected Securities, which had an abysmal year. Municipals, which I liked going into 2013, also struggled, but they did manage to outperform Treasuries.
Finally, in the spring I suggested that after a phenomenal 13-year run, gold was vulnerable to rising real interest rates and I began advocating an underweight to the precious metal. Since I initiated my call in May, gold has fallen from roughly $1350/ounce to below $1,200.
Looking back is always a humbling experience, but I do take one bit of solace as we head into 2014. Hopefully, next year will be one in which every conversation does not begin and end with the word “tapering”. Happy New Years.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Sources: Bloomberg