With November well upon us, it’s time to take a look at asset class performance during October.
To be clear, there is disagreement over what constitutes an ‘asset class.’ There is also frequent disagreement over the best ways to measure asset class performance during any given period. This article is intended to be a snapshot of common asset classes in American portfolios today. Yes, that includes crypto — though we still urge you to view crypto the same way you view going to Vegas or playing the lottery. Use reputable indices, funds, and ETFs to evaluate the big picture (see sources below).
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 things stood as of October 31st (boo!).
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.
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.
[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure and each includes a comprehensive customer PowerPoint about the topic):
©2022. DailyDAC™, LLC d/b/a/ Financial Poise™. This article is subject to the disclaimers found here.]
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