Quarterly TDFs Commentary
12/31/13-Combining “to” and “through” TDFs for all vintages, the average TDF (2010-2050) earned about 5% for the quarter and 16% for the trailing year. During the same period, the S&P 500 earned about 10% for the quarter, but a far more robust 32% for the trailing year. The BarCap US Agg Bond Index lost 0.1% for the quarter and 2.0% for the year. For the trailing year, the average 2015 TDF earned about 10% while the average 2045 TDF earned about 22%, a 12 percentage point spread. The spread between the best and worst performing 2015 individual TDF was about 16 percentage points for the trailing year while the spread between the best and worst performing 2045 TDF was about 20 percentage points. The average 2015 TDF trailed the S&P 500 by 5 percentage points for the quarter, 17 percentage points for the trailing year, 8 percentage points for the three year period and 5 percentage points for the trailing five year period. Mainstream TDFs with aggressive glide paths performed well in 2013, particularly those focusing on US small growth and the developed economies. Less aggressive TDFs with higher fixed income allocations, extended duration and broad diversification, including, TIPS, emerging markets, real estate and commodities, underperformed.
Quarterly Asset Class Commentary
12/31/13- Fueled by a strengthening US economy, modest tapering, strong corporate earnings and a multiple expansion, the six year bull market in US equities reached new highs during the 4th quarter while the global markets were mixed. The S&P 500 was up 9% for the quarter and 32% for the year. Reflecting a broad recovery, all sectors of the S&P 500 were higher, but consumer discretionary, health care and industrials led the charge. Small Cap stocks topped the broad market by almost 10 percentage points. Trailing the US market, the non-US developed market was up 21% while the emerging markets were mixed. Japan was the best performer in local currency, but European countries like Ireland and Greece generated higher US dollar returns. The S&P Emerging BMI declined about 1% for the year, but Latin America was off 13%. Mexico was the only country in the region with a positive return. Driven by higher bond yields, the S&P/BGCantor 7-10 Yr US Treasury Index declined by 6%, the 10-20 Yr year was off by 8% and the 20+ Yr declined by 14%. The S&P US Treasury TIPS index declined by 8% while leveraged loans and high yield bond returns rose by 5-7%. The Dow Jones-UBS commodity index declined by almost 10% for the year while the S&P GSCI declined by 1%. After a decade long run, gold prices ended the year with a 30% decline, but category returns were much worse.