Major equity indexes went their separate ways in 2015. The broad market rally that has characterized much of this multi-year bull run lost steam, and much like the averages, ETFdb’s model portfolios were widespread in their annual returns.
2014 was the year of “Buy the Dip.” Fast forward to today, and the best advice (in retrospect) for 2015’s market environment is perhaps best characterized as “Sell the Pop.” Picking the right sector, industry, and region made all the difference in 2015 as investors rebalanced their portfolios in light of an aging bull market, and ahead of the Fed rate hike.
Below, we break down the five best and worst performing model ETF portfolios to see how they stacked up against one another, as well as the broader market. See all 50+ ETF Model Portofolios here.
For comparison’s sake, consider the following: the S&P 500 (SPY ) and DJIA (DIA ) posted lackluster returns of 0.90% and -0.51% respectively, whereas the NASDAQ (QQQ ) slapped on a healthy gain of 10.69% in 2015, at the time of writing (YTD returns as of 1/2 -12/29/15).
Note that portfolio returns are as of market close 12/28/15.
The Best Performers
In terms of sectors, the best performing slice of the market in 2015 was technology hands-down, followed by health care. In fact, strength in just a few tech-internet names is what propelled the NASDAQ ahead of its major index peers, and kept the S&P 500 dearly afloat; that is the group FANG, or Facebook (FB), Amazon (AMZN), Neftlix (NFLX), and Google (GOOG) is what propelled the High-Tech portfolio ahead of the pack.
The second-best performer, the Baby Boomers Portfolio, saw tailwinds from strong returns across biotech stocks. This still-hot industry posted healthy gains, even after a big shakeout in the second half of the year amid the de-risking period in the market that was spared as a result of rate hike fears.
The bottom three best performing portfolios didn’t really move the needle in comparison to the broad market. Nonetheless, the themes that “worked” in 2015 were: preference for U.S. dollar-denominated assets amid Fed tightening, growth stocks continue to outperform value, and muni bonds were a safe haven for fixed income
The Worst Performers
With the continued collapse of crude oil prices and no signs of mercy from OPEC or Congress (with the lifting of the U.S. export ban), it’s no wonder that the Energy-Bull portfolio found itself at the bottom of the barrel in 2015. Deteriorating growth forecasts in China mixed with U.S. dollar pricing pressures sent metals prices lower and the Mining Boom portfolio followed suit.
When China sneezes, emerging markets catch a cold. The LatAm portfolio in particular was dragged down by Brazil’s negative equity market returns in the year; falling oil prices and weakness in China proved too great of headwinds for the once-hot Brazilian market to overcome in 2015.
The Bottom Line
When looking back at our 2014 model portfolio recap, one could easily call it déjà vu. We see that High-Tech and Baby Boomers were big repeat winners — in fact, all they did was trade spots the last two years. Similarly, emerging markets and commodity-themed portfolios were big losers in both years. It is exactly this sort of multi-year trend persistence which showcases the often times unpredictable nature of cycles, even when we all know that returns should revert to mean over time.
Keep this adage in mind: The market can remain irrational longer than you can remain solvent.
Follow me on @SBojinov