Asset Class Performance Review for October 2022

With November well upon us, it’s time to take a look at asset class performance during October.

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 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).

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 as we move into November.

Digging into the Details

There are a few interesting things worth noting. The first and most obvious is that October saw a shift to risk assets with stocks on the rise once more. The bond market and the US dollar shifted slightly lower in turn, which is how we expect the markets to behave. That might indicate, in theory, that things could be turning around.

If you look at year-to-date performance across most asset classes, though, it’s clear that we have a long way to go in terms of making up losses. No trend has come close to reversing at that level.

In fact, commodities were substantially up once more, only furthering their increases this year — good for traders who went long but not so good for the goal of fighting inflation.

What Might Be in Store in November

Our economic trajectory might be influenced by what happens at the polls. Financial markets historically perform poorly in the months before midterm elections and then outperform in the following 12 months. This tracks what has happened so far this year, but we’re not optimistic about a post-election bump.

As Liz Ann Sonders, Schwab’s Chief Investment Strategist, explains:

“Post-election outperformance is often driven by the market’s expectation of increased government spending from a new Congress. […] But an additional infusion of funds seems unlikely this year, given the government’s historic levels of spending and stimulus in response to the pandemic. In fact, all that money is one contributor to the 40-year high in inflation, and any new spending would likely exacerbate the issue.

[…]

The combination of high inflation, the war in Ukraine, and a lingering pandemic has already made this cycle, unlike prior midterm years. […] With so many other forces at play in the market, I wouldn’t put much weight in historical midterm-year performance.

In other words, the economic climate is not necessarily aligned with historical trends. Keeping an eye on the performance of different asset classes is now more important than ever.

See additional Financial Poise asset class performance analysis here.

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©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.