US property shares led the winners in global markets in 2021
All the strategy benchmarks posted strong gains last year
REITs roared: US real estate investment trusts (REITs) were the clear winner in 2021’s horse race, based on our standard 16-fund opportunity set (see table below). Although other slices of global markets posted strong gains, nothing else came close to the sizzling performance for US REITs in the year just passed. For details on the metrics in the table below, see this summary.
Vanguard US Real Estate (VNQ) surged 40.5% in 2021, easily lifting the ETF to first place for our opportunity set last year.
The second-best performer: US small-cap stocks via iShares Core S&P Small-Cap (IJR), which popped nearly 27% in 2021.
US stocks overall were in third place for 2021: Vanguard Total US Stock Market (VTI) rose 25.7% last year.
The big losers in 2021 were concentrated in emerging markets. The iShares Latin America 40 ETF (ILF), which tracks the region’s biggest stocks, fell 13.5% over the past 12 months — the worst performer in the opportunity set by far.
The second-biggest decline in 2021: bonds issued by governments in emerging markets via EMLC, which retreated 9.7%.
Is it time to start bottom-fishing in corners that have taken a beating in 2021? I don’t see an especially compelling value play for the 16-fund opportunity set. That said, the VanEck Vectors Africa Index (AFK) is on our short list as a potential leader for the near term outlook. This is a still-speculative outlook, but if AFK can rally above its previous high — roughly $22 — that would boost our near-term expectations for the fund.
Double-digit gains for the strategy benchmarks in 2021: Global diversification paid handsome rewards last year. Our equal-weighted Global Beta 5 EW (G.B5.ew) strategy was especially hot in 2021.
Holding just 5 ETFs that span global markets, G.B5.ew outperformed its counterparts by a wide margin via a 17.1% total return in 2021. For a list of ETF in G.B5.ew, see this summary.
Three of the five funds in G.B5.ew powered last year’s rally in the portfolio. Property shares led the way, pulling far ahead with a 33.3% gain in 2021 via iShares Global REIT (REET). Commodities (GCC) were in second place with a distant 21.5% gain. Global stocks (VT) were in third place, rallying 19.0%. The two slices of the bond markets — US (BND) and foreign (BNDX) — in G.B5.ew weighed on results, posting modest losses last year. ■