Each year, the investment consulting firm Callan LLC publishes their “periodic table” of investment returns. The table arrays the nine major asset classes (i.e., large cap equity, small cap equity, U.S. fixed income, etc.) by total return by year. It always amazes me how the leaders and laggards change positions each year. The 2020 edition is shown below.
Let’s walk through a couple of asset classes to see how they have done over time. The annual total returns for the “Large Cap Equity” asset class are shown by the dark blue box above. As you can see, it has had quite an amazing run over the last 8 years with that asset class finishing in the “top 3” in seven of the last eight years. However, in the 8 years prior to that it was in middle of the pack. And, in the 4 years before that starting in 2001, it settled in at the bottom of the pile.
Likewise, “Emerging Market Equity” (the dark orange box) had a great run from 2003 through 2009, until it hit the skids in 2013 through 2015, with a decent recovery in 2017 and 2020. Also, interestingly, “Cash” was the best returning asset class in 2018; an unusual feat for the historically lowest risk, lowest return asset class.
Of course, evaluating this data is more complicated than just noting the places where they finish since the relative and absolute returns are ultimately more important to overall long term performance, but it is still instructive to see the trends shown.
The important message, as always, is to be diversified in a manner consistent with your investment objectives since there is almost no telling which “box” will be a winner in any given year.