Asset Class Performance Review for August 2022

In a world of constantly shifting markets and concerns about portfolio allocation strategies, we know it can be difficult to keep track of everything. That’s why, from now on, we’ll be bringing you a regular review of how asset classes have performed in the last month and year-to-date along with relevant commentary.

To be very clear: there is often a lot of disagreement over what constitutes an asset class. There is also frequent disagreement over the best ways to measure the performance of an asset class during any given time period. This is intended to be a snapshot of some of the most common asset classes in American portfolios today (which, yes, includes crypto now) by using reputable indices, funds, and ETFs to help us look at the big picture (see below for sources).

The exception to that rule is the inclusion of hedge funds. The average investor, unless they have allocation to a fund tracking an index or basket of fund allocations, probably cannot access a direct hedge fund investment due to minimum investment and available capital requirements. In some cases, the funds may be closed to new investors altogether. However, given that they are arguably one of the largest alternative investment groupings in terms of assets under management and overall market size that can be reliably tracked in any way, we decided to include them in our tracking.

Your exposure to said asset classes may be the same or different. And it should be noted that this data is not intended to be any kind of financial advice and that different kinds of investments carry different risks which may not be appropriate for every investor.

This is just information. What you choose to do with it is ultimately your choice.

So whether you’re investing on your own, looking for insights that can help facilitate conversations with your financial planner, or are just plain interested in the numbers, this is where we stand headed into September.

What These Movements Might Mean

The data is not, ultimately, all that surprising. Domestic stocks, despite momentary bounces, have been on the decline for quite some time, and international markets have been hit even harder. We knew commodities as a whole had soared, driven in particular by the crisis in Ukraine and ongoing energy shortage. There are, however, two points worth considering otherwise.

First, both hedge funds and crypto have been taking a huge hit this year. That is not news. What is interesting, however, is that investments in both of these asset classes are typically billed as alternatives that can be leveraged within your portfolio as a hedge against traditional investments in free fall. Yet, here we are, and they aren’t acting like much of a hedge.

In fairness, it is difficult to look at this data and claim it is a normal investing climate. Stock and bond markets performance typically demonstrates an inverse relationship. This makes sense, as bonds are typically seen as a safety play during periods of market instability. Clearly, that’s not the dynamic lately. In fact, the last time we saw this many asset classes move down in tandem was – drum roll, please – the 2008 crisis.

Is this exactly like 2008? No. Does that mean we aren’t headed fast for a crash? Also no. We’ve written before, though, that we could very well be staring down the barrel of a recession that just looks different than what we saw in 2008. That doesn’t mean it won’t be painful.

For now, buckle up. We’ll be back with an update next month.