Financial market returns were broadly distributed in the first quarter of 2015 following
several years of narrow leadership centered on large cap U.S. stocks. As shown below,
foreign stock markets rebounded following poor results in 2014.
Narrow leadership has created a frustrating environment in recent years for investors
with diversified portfolios. Even so, the tide could be turning. With the Federal Reserve
set to raise interest rates, and foreign central banks now engaging in stimulus, overseas
markets have shown improved relative returns.
It is too early to say whether recent results will mark a decisive shift in leadership.
Regardless, we believe long-term investors will benefit from being diversified.
Remember: the goal of diversification is not to increase returns, but rather to
improve risk-adjusted results. It can allow investors to achieve attractive returns
without undue risk.