The table below illustrates a few interesting points about how different investments and strategies fared through the crisis and the ongoing recovery. The table below shows the price performance of the efficient instruments we would use to gain exposure to each of those sectors. It is by no means a complete list, just a few broad sectors or classes worth looking at. Just an interesting set of investments to look at across interesting recent time periods.

The 2008 performance shows basically two broad groups, G7 indices falling around 35% while international and commodities indices fell more than 50% following the fate of US financial institutions. The picture since Lehman went bankrupt (the 12 month window) shows a narrower situation, with most equity indices in the -10 to 0% range, with the exception of US financial institutions being still 20% below their Lehman bankruptcy week levels, and the BRIC countries being 20% above those lows. Some of these relative situations have been fairly constant, as seen in the year-to-date (YTD) column.

1-mo 3-mo March 9 YTD 12-mo 2008
S&P500 4.9% 14.4% 54.0% 18.9% -9.8% -37.0%
S&P Global 5.5% 16.7% 59.8% 17.4% -3.9% -36.0%
Asia ex-Japan 6.8% 23.3% 93.4% 50.3% 11.6% -47.6%
BRICS 5.8% 13.8% 95.8% 64.8% 16.8% -57.0%
US Banks 3.8% 21.3% 114.1% 16.9% -18.8% -50.0%
Tech 5.5% 16.6% 62.4% 41.0% -0.1% -41.7%
Materials 8.2% 18.3% 84.7% 46.8% -1.3% -48.0%
Materials US 9.6% 24.1% 94.2% 52.8% -11.0% -50.7%
Energy 8.5% 7.2% 44.0% 19.5% -5.3% -36.8%
AgriBusiness 2.2% 8.5% 58.2% 42.1% -3.3% -51.0%
Short Credit 0.4% 2.1% 6.4% 6.1% 7.7% 3.8%
Credit 2.9% 8.1% 16.6% 8.1% 12.7% 2.9%

A point worth making is the more recent outperformance of international, technology and commodities sectors (not so much the agro commodities but the companies in that sector). This responds to a few drivers that point in the same direction. Good balance sheets do better during a banking/credit crisis, with countries away from G7 not having dented their balance sheets as much as G7 governments. The same balance sheet point applies to technology, a sector in which most companies have lower debt and higher growth potential. Another driver is the expected and already real depreciation of core currencies (USD, EUR, etc., vis-a-vis the next best group and the better EM currencies). And finally, but not necessarily unrelated to the last point, higher growth in EM countries already being shown by stats. The fact that most EM countries fared this last crisis much better than previous crises is material for a whole separate and elaborate essay about their graduation process.

In sum, we continue to prefer the growth potential of better balance sheets (countries and companies), of commodities (due to both growth and USD depreciation protection), a selected group of Asia and Latin America, and US credit (mostly shorter duration, but have some exposure to the overall group).
The simplistic tone of this note responds to my attempt to write shorter notes. Let me conclude by saying that our most representative portfolios have had for a few months now overweights in materials and energy and agriculture, clearly in Asia ex-Japan (with some specific countries emphasized), some direct BRICs exposure (with Brazil overweighed), less so in technology, and short duration in US credit. The portfolio we showed during our last marketing trip, shown in the spirit of a model portfolio, was started on July 9th, and the week of August 17 went through a reallocation into more materials and an incursion in Germany. That portfolio is up close to 12% since July 9th.

For more information view our contact info