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Financial Articles from Hefren-Tillotson

Diversification Makes a Comeback

July 27, 2016

Markets continue to benefit from a post-Brexit vote advance led by areas such as high yield bonds, small caps, and emerging markets. Global real estate has also benefited from a decline in interest rates following the Brexit referendum.

The backdrop for global markets appears positive. Policymakers around the world accommodate with some likely to announce new stimulus measures. There are some signs of better economic growth, particularly in China, which was a key concern during the market sell-offs in August 2015 and January of this year. Market technical are also healthier with more participation within the market, a sharp contrast to the narrow leadership experienced in 2015. Finally, we are entering one of the more favorable phases of the presidential cycle.

Diversification is working again after a reprieve in 2014 and 2015. The table (below) illustrates asset class returns over the past three years. While returns of the average asset class are suppressed on a one and three-year basis (only 1.3% and 3.1% respectively), conditions have improved this year. The average asset class has advanced 6.8% in 2016 despite elevated market volatility.

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