Here’s a quick instant how different asset classes moved yesterday, last week and last month.
- Stocks fell 0.3% yesterday, compared to 0.4% weekly change and 0.6% monthly change
- Bonds rose 0.1% yesterday, following weekly moves of 0% and monthly moves of 0.09%.
- Gold fell 1% last session, with weekly increases of 2.6% and monthly increases of 5.9%.
- Commodities fell 0.9% yesterday, continuing their weekly and monthly declines
- Real estate slipped 1% yesterday, showing weakness over the week and month
- Bitcoin fell 1.2% yesterday, with weekly variations of 4.8% and monthly variations of 3.6%.
| ETFs | 1D | 1W | 1M | |
|---|---|---|---|---|
| Equity | SPY | -0.3% | 0.4% | 0.6% |
| Bonds | AGG | 0.1% | 0.0% | 0.1% |
| Gold | GLD | -1.0% | 2.6% | 5.9% |
| Raw materials | DBC | -0.9% | -0.2% | -3.2% |
| Real estate | VNQ | -1.0% | -0.8% | -0.6% |
| Bitcoin | BTCUSD | -1.2% | 4.8% | 3.6% |
Why is this important?
- See where capital circulates: The performance of asset classes reveals investor sentiment, from the resumption of risk to the flight to safety.
- Track correlation changes: Increasing correlations reduce diversification benefits and increase portfolio risk in times of crisis.
- Spot early rotation signs: Changes in leadership within stocks, bonds or commodities often precede changes in the macroeconomic regime.
Trefis works with Empirical Asset Management – a Boston-area wealth manager – whose asset allocation strategies generated positive returns during the 2008-09 period, when the S&P lost more than 40%. Empirical has integrated the Trefis HQ portfolio into this asset allocation framework to offer clients better returns with less risk compared to the benchmark; it’s less of a roller coaster, as evidenced by the HQ portfolio’s performance metrics.
Capital flow patterns have governed the historical risk-return profile
| ETFs | Back | Volatility | Sharpe | |
|---|---|---|---|---|
| Equity | SPY | 14.6% | 15.0% | 78.6% |
| Bonds | AGG | 2.0% | 5.1% | -10.6% |
| Gold | GLD | 14.9% | 14.1% | 84.9% |
| Raw materials | DBC | 6.8% | 15.7% | 32.0% |
| Real estate | VNQ | 5.0% | 17.6% | 20.6% |
| Bitcoin | BTCUSD | 71.0% | 75.6% | 101.8% |
Figures are on an annualized basis, based on monthly return data for the past 10 years.
How stable is the correlation between different asset classes?
| Equity | Bonds | Gold | Raw materials | Real estate | Bitcoin | |
|---|---|---|---|---|---|---|
| Equity | – | 11% | 20% | 9.8% | 5.2% | 13% | 4.0% | 35% | 24% | 36% | 73% | 69% | 63% | 25% | 38% | 40% |
| Bonds | 11% | 20% | 9.8% | – | 34% | 33% | 9.6% | -0.3% | -3.0% | -15% | 28% | 38% | 37% | 11% | 7.1% | -3.3% |
| Gold | 5.2% | 13% | 4.0% | 34% | 33% | 9.6% | – | 26% | 34% | 32% | 13% | 19% | 11% | 11% | 8.3% | 9.1% |
| Raw materials | 35% | 24% | 36% | -0.3% | -3.0% | -15% | 26% | 34% | 32% | – | 24% | 16% | 22% | 10% | 12% | 22% |
| Real estate | 73% | 69% | 63% | 28% | 38% | 37% | 13% | 19% | 11% | 24% | 16% | 22% | – | 17% | 25% | 19% |
| Bitcoin | 25% | 38% | 40% | 11% | 7.1% | -3.3% | 11% | 8.3% | 9.1% | 10% | 12% | 22% | 17% | 25% | 19% | – |
The numbers above are correlations for the last 10, 5 and 1 years, in the same order.
Which assets experienced the greatest monetary turnover during stock market crashes?
| ETFs | Inflationary shock | Covid pandemic | 2018 correction | |
|---|---|---|---|---|
| Equity | SPY | -23.0% | -30.4% | -19.3% |
| Bonds | AGG | -14.1% | -2.1% | 1.4% |
| Gold | GLD | -7.7% | -6.3% | 5.0% |
| Raw materials | DBC | 20.5% | -23.7% | -16.5% |
| Real estate | VNQ | -29.8% | -41.6% | -11.1% |
| Bitcoin | BTCUSD | -56.0% | -33.5% | -37.4% |
The table shows how different asset classes performed during market crises, particularly during the period when the S&P fell to its lowest level.
The Trefis High Quality (HQ) portfolio, with a collection of 30 stocks, has a comfortable track record of outperformance compared to its benchmark which includes all 3 – S&P 500, Russell and S&P midcap. Why then? As a group, stocks in the HQ portfolio have generated better returns with less risk relative to the benchmark; it’s less of a roller coaster, as evidenced by the HQ portfolio’s performance metrics.
