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These Diversifying Asset Classes Have Posted Strong Returns in 2017

September 7, 2017

Two diversifying asset classes have posted outsized returns in 2017. Foreign real estate and foreign small cap stocks have risen in the neighborhood of 20% in response to stronger economic growth overseas. U.S. small caps and U.S. real estate have posted modest results by comparison following a strong 2016.

Small caps and real estate tend to be sensitive to local economic conditions. As overseas economies have improved in 2017, stock prices have risen rapidly. Domestically-oriented U.S. assets such as real estate and small caps have lagged this year as hopes fade for economic stimulus from Washington.

Valuations suggest these markets have potential for further gains. Foreign small caps have a price to earnings ratio of 16, meaningfully below U.S. stock averages. Likewise, foreign real estate trades at a P/E of 11 versus 29 for domestic shares, according to S&P.

Overseas assets also offer attractive income. Foreign small caps and real estate yield 2.5% and 3.9%, respectively.

Having a broadly diversified portfolio often means owning ancillary asset classes that perform differently from other holdings. We continue to recommend foreign real estate and small caps for risk-tolerant investors, and favor these sectors versus U.S. real estate and small caps.

 

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Hefren-Tillotson Inc., is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN for individuals and businesses. The firms wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFSs. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills.

 

Disclosure:This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.