A bullish tailwind continued blowing through most asset classes in May. The main exceptions: commodities overall and two corners in the foreign-bond markets (high yield and corporates). Otherwise, prices were generally higher last month for the major asset classes, led by a 3.9% increase in foreign REITs/real estate, based on the S&P Global ex-US REIT Index.

The Global Market Index (GMI), an unmanaged benchmark that holds all the major asset classes in market-value weights, posted its fourth straight monthly gain, rising 1.5% in May. For the year so far, GMI is up a healthy 4.2%, or just a touch below the year-to-date gain for US stocks (Russell 3000 Index) through May 31.

GMI’s recent total return performance (+13.1% over the past 12 months, for instance) looks impressive, but it’s reasonable to assume that returns going forward will trend lower. Even if you expect moderate economic growth to prevail, as I do, this outlook is already priced into assets overall. My current long run projection for GMI’s risk premia is roughly 4%. Assuming that cash will continue to yield zero in the near-term future, this forecast implies that GMI’s performance over the “risk-free” rate will ease a bit relative to what we’ve seen in recent history. As a result, a deft hand with rebalancing and/or second-guessing Mr. Market’s asset allocation will become increasingly critical tools for overcoming a run of lesser returns going forward.