2019 Asset Class Returns: How Do They Stack Up?
The Veater Financial Table of Investment Returns ranks the annual performance of key asset classes over each of the last 20 years. The best asset class for a given year is listed at the top, with the lowest returning asset class listed at the bottom. As we look back on the first half of 2019, here are a few key takeaways:
1) 2019 - Record setting. Same headline, different year. It was a little over six months ago that I wrote remarks regarding the selloff we experienced EOY 2018. Despite a turbulent 2018 we still experienced new record highs for the year. And here we are, mid-year 2019 again setting records. The S&P 500 broke through the 3,000 mark this year and recently set its all-time high at 3,014.30 on July 15, 2019, market close. Not to be outdone, the Dow set its all-time high record close that same day at 27,359.16. Quite a different story YTD, yet still setting records for new highs.
2) At the Half. The first half of 2019 (through 06/30/2019) the S&P was up +18.5% (total return). Speaking performance at the half- way point, this was the best the S&P has performed since 1997. During this time frame 22 years ago the S&P was +20.6% (total return). Also at the first half of 2019, 418 of the stocks in the S&P 500 were up. 221 were up at least +20%, and 40 stocks were up at least +40%. (Source: BTN Research)
3) Outlook. On July 1, 2019 US economic expansion started its 11th year. We are now making history as we are in the longest running expansion in our nation’s history. To date the US is still in deep negotiations with China regarding trade. Uncertainty in this area has created quite the media buzz yet it has not diminished performance on small caps, emerging markets, and global equities. And we are still waiting to see if we’ll get that rate cut from the Fed. In every case going back to 1971, when the Fed began a new easing cycle while the economy was expanding, stocks went up three months, six months, nine months and 12 months later. No exceptions. (Source: Forbes, July 15, 2019, National Bureau of Economic Research)
One of the key conclusions that we draw when looking at how the stock and bond markets perform over time is the importance of diversifying one’s investment assets. No asset class stays at the top. There is a constant rotation in what is performing well during any given year. And we believe that the most prudent and likely way to generate desirable risk-adjusted returns is to maintain diversification across asset classes. Note that the chocolate box you see on this chart represents a “Moderate Growth” style of investing. It diversifies across the various asset classes listed and historically can create a more consistent return.
"Moderate Growth" is a hypothetical portfolio for illustrative purposes, and is not representative of any investment, account, or portfolio offered by Veater Financial Group.
Stock investing involves risk including loss of principal.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
No strategy, including asset allocation, assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Strategies and investments mentioned may not be suitable for all investors.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Any economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.