Foreign Developed-Market Stocks In The Lead Last Week 

Global Market Index

James-PicernoStock markets in the developed world outside the US led the major asset classes higher last week, based on a set of proxy ETFs. Vanguard FTSE Developed Markets (VEA) posted an 0.8% total return for the five trading days through May 20, delivering a slightly stronger performance vs. the rest of the field. Last week’s biggest loser: US real estate investment trusts (REITs), which gave back some of the strong gains earned over the past three months. Although Vanguard REIT ETF (VNQ) is still up 10% for the trailing 3-month period, Fed chatter in recent days about a rate hike convinced the crowd to lighten up on this yield-sensitive asset class, pushing VNQ down by 2.8% last week. Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times on Sunday that the conditions for a rate hike are “on the verge of broadly being met.” Meanwhile, an ETF-based version of the Global Markets Index (GMI.F), an investable, unmanaged benchmark that holds all the major asset classes in market-value weights, was unchanged last week. ETF Performance Despite the latest slide in US REITs, securitized real estate in the US continues to hold the top slot for performance in the year-over-year column. VNQ is up 6.6% for the year through May 20 on a total-return basis, which represents a substantially stronger gain vs. the other major asset classes. The big loser over the past 12 months: emerging-market stocks. The Vanguard FTSE Emerging Markets ETF (VWO) has shed more than 23% for the trailing one-year period through May 20. “Bets for a June Fed hike have gone through the roof, providing a negative backdrop for emerging-market assets,” Joseph Dayan, the head of markets at BCS Financial Group, told Bloomberg last week. “We have had a good run and some investors were looking to take profit. This was the trigger that allowed that profit-taking to happen.” The broad trend for markets generally remains weak as well for the trailing one-year period, based on GMI.F. This benchmark of the major asset classes is down 3.9% through May 20. Global Market Index   By James Picerno

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