Q4 2018 Returns By Asset Class

For the last several quarters, I’ve posted returns by asset class (by representative ETF), as well as year-to-date, last twelve months, and last five years. While there is still no predictive power in this data, I updated those charts as of the end of Q4 2018 for those of you that are interested.  Since year-to-date and last 12 months are the same right now, I added a chart that shows returns since 3/9/2009 which was the S&P 500 low after the financial crisis.  Charts shown in the link below, legend at the bottom, zoom to your liking):

2018Q4 Asset Class Performance

A few call-outs from the data:

  • Q4 2018 was terrible for all risk-based assets led by declines in US Small Caps (-18.5%) and US Large Caps (-13.5%) with Foreign Developed Stocks not far behind (-13%).  Emerging markets fared somewhat better (-6.5%).  Commodities were down nearly 11%, led by a 40%+ fall in the price of oil over the course of the quarter.  Bonds outperformed by a ton, as they typically do when stocks do poorly and that’s why they’re of such value in even aggressive portfolios.  Both short-term investment-grade bonds and aggregate bonds posted slightly positive returns.
  • All asset classes were down for 2018 as a whole except short-term investment-grade bonds.  Aggregate bonds were down less than 1%.
  • In the 5-year and long-term charts you can see that foreign stocks are closing the gap somewhat with US stocks recently.  That’s coming from foreign stocks falling less than US stocks over the quarter / year.  Valuations on forward looking basis are about average now for US stocks and downright cheap for emerging stocks.  Unfortunately, that’s based on estimated earnings going forward and if there is a global economic slowdown, those earnings estimates would come down making US stocks seem more expensive and emerging markets less cheap.  No one knows if that will happen, and the market has already priced in some probability of a recession.  For more on the what’s currently plaguing the market, the risks, and the upside, please see my last post from December.
  • In the long-term chart, you can clearly see 1) the massive outperformance of US stocks since the financial crisis, with the recent fall being a fairly small give back, 2) the slow and steady stable grown of bonds, and 3) the utter devastation in commodities, still down more than 30% from March 2009.