Everybody Wins!

2019 has been a good year for pretty much everything in the financial markets.

U.S. stocks, long-term government bonds, and gold are all up big this year:

I can’t remember a year when all three of these very different assets were all up so much at the same time.

So I looked back at the annual returns on all three going back to 1930. There was exactly one time when all three were up 15% or more in the same year.

In 1986, the S&P 500 was up 18% while gold (+22%) and long-term government bonds (+25%) were also up a lot.

Keeping with this same theme, I wanted to find out how often the three of these assets were all down during the same year.

This too has happened just once since 1930. It just so happened to be last year:

So we now have something that’s never happened before in one year, followed up by something that’s only happened one time in history (assuming it holds for the remainder of the year, which is far from certain) the next year.

Granted, we’re still only eight months into the year. It’s hard to make any concrete conclusions from such a short period of time.

The only thing 2019 has in common with 1986 is interest rates were falling in both years. But the biggest difference between now and then is rates1 began 1986 at 9.3%, falling to 7.1% by the end of that year.

This year rates have gone from 2.7% to 1.4%.

I suppose you could blame the fact that rates are as low as they’ve ever been for the unorthodox asset class moves we’ve seen over the past couple of years.

There are two ways to look at this:

(1) Financial market relationships are broken for some reason.

(2) Things that have never happened before seem to happen more often than we think.

I lean more heavily in the second camp but anything is possible.

One of my biggest takeaways from looking at this long-term data is the power of diversification. It’s rare for these different asset classes to rise and fall in concert with one another during the same year.

This is a good thing for portfolio construction purposes. It means diversification is working.

Further Reading:
The Optimal Portfolio

Now here’s what else I’ve been reading lately:

110 year treasury yields

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.