2015, Negative year for the Major asset classes !!!
There is a famous saying in portfolio Management theory that “don’t keep your eggs in one basket” means diversification is necessary for the better returns. But the year 2015, couldn’t work as per this theory. After a 3 consecutive positive returns since 2012, 2015 couldn’t work as per the expectations of many bigwigs. Indian equity market started with solid gains and climbed to all time high at 9150 levels but finally lost all gains and closed in red. On the other side because of the positive US data and economic number Indian rupee hammered and closed near its year’s high. But the one asset which hammered the most in the year 2015 was Commodity. Gold, Silver, Metal and Energies plunged and touched their lowest levels in last 8 years.
The depth of losses in equities and commodities is nowhere near as bad as in 2008; the correlation of declines highlights the challenge for money managers who seek to amplify returns by rotating among assets. Coming to the real asset investments, in the last one year investors would have earned a better rate of return if they had invested in a fixed deposit. The only investment class that stood as per the expectations of few investors is Bond market. All credit goes to the falling crude and commodities price which helped the Indian Central bank to reduce the interest rates. Commodities have fallen to a decade low as tepid global inflation dimmed the allure of precious metals, weak Chinese demand hurt raw-materials prices and a global supply glut sent crude oil tumbling.
Even India currency couldn’t take the advantage of falling price of falling interest rate parity between US and India. A record $8 billion flew out of the economy because of the better and safer return from the US bond markets. Indian rupee fell by ~ 9% where Equities gave negative return of negative ~2.5%.
But the main question is , were the smart players were not so smart this year?? Let’s discuss few minor but major events that could have saved many investors. Starting with the Positive economic and former US Fed governor Ben Bernanke’s word “US is in better shape and we would thinking of raising rates when the US unemployment rate would fall till 5%”. Simple lines could have helped many players. This is obvious that US was going to raised rates till the December 2015. Other important words by the Saudi king “We have enough cash reserves” means they are reading to incur losses to combat US rising crude reserve or in a simple words WAR OF EGO’s. Last but the not the least, China’s ghost city that was built few years back. This could have helped in understanding Commodity crisis in advance.
But few investors would have gained stupendously in few Mid Caps companies like Jet Airways and Spice jet by just applying common sense that falling crude having these stocks have strong negative correlation.
Hence it’s time to say goodbye to the year 2015 and welcoming 2016 with an open armed.
We wish a very happy and wealthy New year to all !!
