The ETF Portfolio Strategist - Saturday, Jan. 2

Asia Ex-Japan Equities Led 2020 Returns 

If you held a healthy share of equities across Asia -- excluding Japan -- in your investment strategy last year, congratulate yourself. This slice of global asset classes not only posted the strongest return this week, Asia ex-Japan also outperformed the rest of the field for our list of proxy ETFs representing the major asset classes on a global basis.

The iShares MSCI All Country Asia ex Japan ETF (AAXJ) closed on Dec. 31 with a strong 3.3% weekly gain (based on a shortened holiday trading week in the US). The increase translates to a 21.0% total return for 2020. On both fronts, AAXJ was the top performer.

China shares are AAXJ’s biggest country allocation, comprising nearly 44% of the fund’s assets (as of Dec. 30), according to iShares. A key factor in the bull run: China’s economic recovery from the coronavirus – the strongest in the world among big economies.

There were only a handful of losers in 2020 via the major asset classes. US and foreign real estate shares suffered a moderate degree of red ink last year. The only other 2020 decline on our proxy list for the major asset classes: stocks in Latin America. Although the iShares Latin America 40 ETF (ILF) rallied sharply in the fourth quarter, it wasn’t enough to offset losses from earlier in the year, leaving the fund down by nearly 14% in 2020.

A common denominator in 2020 for nearly every fund in the table above: strong upside trending behavior at last year’s close (as shown by the current MOM rating column in the table above).

The glaring exception: US Treasuries, which continue to reflect a mild but persistent downside trend rating, based on iShares 7-10 Year Treasury Bond ETF (IEF). (For details on all the risk metrics as well as the strategies and benchmarks, see this summary.)

A Strong Run For Beta Risk In 2020 

The popular US 60/40 stock/bond strategy mix (US.60.40) topped our standard menu of unmanaged portfolio benchmarks in 2020. This measure of US equities (VTI) and US bonds (BND) rebalanced to a 60%/40% weight, respectively, at the end of each calendar year, rising 15.1% over the past 12 months.

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Disclosure: None.

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