Value and Momentum: April 2014

One strategy we use to improve performance beyond Basic Strategy is to tilt client portfolios toward asset classes that are more attractive based on value and momentum measures.

Let’s look at what this analysis tells us today.

The value and momentum scores for the ten broad asset classes we consider are shown below. The upper right area is the ideal spot for an investment, indicating both attractive value and positive momentum. You can see that value and momentum are usually opposites, with most investments attractive in terms of one, but not both.

Value-Momentum-2014-04Source: Mariposa Capital Management, LLC

As of 4/9/2014, US Stocks are still one of the least attractive investment in terms of value. However, their impressive gains over the last year also make them the most attractive in terms of momentum. US bonds (Treasuries and TIPS) are in the opposite situation of decent value, but poor momentum. Surprisingly, Cash still shows the best value characteristics (relative to other asset classes).

The most attractive asset classes using both value and momentum are Foreign Stocks and Cash. These two switched positions from January. The most unattractive asset classes are US Real Estate and Foreign Real Estate. Foreign Real Estate moved into the bottom two, replacing Emerging Market Stocks.


For this analysis, we are using the following funds as proxies for each asset class.

Asset Class Fund Ticker
US Stocks Vanguard Total Stock Market VTI
Foreign Stocks Vanguard FTSE Developed Markets VEA
EM Stocks Vanguard FTSE Emerging Markets VWO
US Real Estate Vanguard REIT VNQ
Foreign Real Estate Vanguard Global ex-US Real Estate VNQI
Commodities PowerShares DB Commodity DBC
Commodity Stocks SPDR S&P Global Natural Resources GNR
US Treasuries iShares 7-10 Year Treasury Bond IEF
Cash iShares Short Treasury Bond SHV

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