Market Perspective Archives

Yearly Asset Class Returns

Key take aways Diversification is a great way to reduce the volatility of your portfolio. It is hard to predict which asset class will be the winner from year to year. How do you read the chart? The chart presents the annual returns for 9 major investment asset classes from 2008 to 2022. A tenth box is added to represent a sample "Asset Allocation" portfolio as discussed below. Each asset class and portfolio is assigned a color. Here is a guide to the labels and what they mean: Equity or Stocks Large Cap is the return of the largest 500 companies by…

How Headline Inflation Works

It has been a long time since Americans have dealt with serious inflation. The United States, and the whole world, is working to bring down inflation resulting from the lingering effects of COVID-19 and the prolonged invasion of Ukraine by Russia. I would like to provide a little insight into how the Headline Consumer Price Index (CPI) is calculated and what to expect going forward.Inflation is comprised of many different components (energy, food, and goods) that build up to one primary number called Headline CPI that is typically reported and discussed in the news.Below is a chart of annual inflation…

Ukraine and the changing market environment

With geopolitical tensions such as the conflict between Russia and Ukraine, investors often ask whether a link exists between current events and financial market performance. However, when we examined major geopolitical events over the past 60 years, we found that while equity markets often reacted negatively to the initial news, geopolitical sell-offs were typically short-lived and returns over the following 6- and 12-month periods were largely in line with long-term average returns. On average, stocks returned 5% in the 6 months following the events and 9% in the 12 months after the events as shown below. This article was reposted…