ebook essays pieces of the puzzle
Thursday, March 29th, 2012
risk assets

Here are two popular “risk assets” from the iShares ETF offerings:  HYG offers high yield bond exposure and IWM seeks to deliver the returns of small cap stocks.  The chart begins when HYG started trading.

The top panel shows price return, the bottom one is total return.  As you’ve heard here before, performance comparisons should be based on the latter, even though you’ll often see price comparisons because they are more widely available.  On that basis, IWM looks like it has done better, when in reality HYG has beaten it handily.

Of late, the shoe has been on the other foot, with IWM ahead 37% since the October bottom, compared to 15% for HYG.

Given how low yields have gotten on junk credits, should investors stay in a risk-taking mode, HYG is likely to continue to lag.  But it should do much better than IWM during down periods, as it has during each “risk-off” time above.  (Chart:  Bloomberg terminal.)

Other recent pix:  What happened to two “ticker toys“; twenty years of volatility on stocks, oil, and gold; and an interesting look at the intensity of trading in Apple and other market leaders.