Performance chart for 2022 and 10 year performance
I read and follow the works of Ben Carlson of Ritholtz Wealth Management, as he is a great financial writer. Every year he updates the infamous “quilt chart” which shows the performance of all asset classes dating back to 2013. The chart then culminates on the asset class returns over the full 10 year time period.
Once again what this chart goes to show you is the importance of diversification amongst asset classes. This also shows the importance of rebalancing your investments. 2022 was on of the worst years on record for the stock market, and the single worst year ever for bonds. Recession, interest rates and inflation dominated the headlines throughout the year in what looked like an inevitable recession was on the way. GDP started to year negative for two quarters in a row and we are still not out of the woods when it comes to the possibility of recession.
Here are a few takeaways from the chart above. As you can see, every asset class was negative except for Commodities and Cash. Commodities are one of the best hedges against inflation, therefore, they led all other assets classes from a performance standpoint. Energy was a top performing commodity for the year and several large companies reaped the benefits of higher oil prices including Exxon and Chevron. Large cap stocks performed the worst out of United States stock market asset classes, mainly driven downward by large cap growth stocks.
The interesting part of this chart for me is the 10 year returns for these asset classes. The 10-year returns fall right in line with where I would expect them to be with large cap stocks leading the way. From there, mid cap and small cap stocks were next in line from a performance standpoint with almost identical performance the past 10 years. Overall, this chart gives me hope for this year and the years coming. When looking at investing to have a year like we just saw raises optimism about long term returns from here. Only twice in history did we see a “lost decade” 2000’s and 1930’s where the stock market was flat for that year. We are not out of the woods yet with the Federal Reserve still taking a hawkish approach with their stance on interest rates. The labor market will need to continue to cool off before any changes can happen with their tone on interest rates, however, once they do announce that they are going to stop raising interest rates the market has responded positively to that in the past.
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