ASSET-CLASS performance so far in 2014 contrasts with performance in 2013 and also helps illustrate the importance of diversification for investors. Those markets which did very well last year, such as developed market equities, have not done as well this year, whereas most of the markets that were "beaten up" last year, such as emerging market equities, have often rebounded this year.
As a result, while traditionally very high, the correlation between developed market equities and emerging market equities has fallen back recently. Should investors be pleased about this, or worried? The answer is: It depends how you invest.
In 2013, developed market equities did exceptionally well, while most bond...