Stocks struggled in 2018. Bonds too. Oh, and gold.
NEW YORK — Even the most balanced investors have been knocked on their heels this year.
Typically, spreading one’s bets across several types of investments has helped deliver steadier returns.
When U.S. stocks slide, say, bonds and gold can hopefully help offset the losses. Or maybe stocks abroad will hold up better than their U.S. counterparts.
Not so this year.
U.S. stocks have endured some breathtaking drops the last several weeks, slicing the S&P 500’s year-to-date return to 2.2 per cent after including dividends.
But markets in Germany, South Korea, Hong Kong and elsewhere are solidly in the red year-to-date.
Even worse for investors who carefully built up balanced portfolios to protect themselves from potential downturns: The investments that are supposed to offer safer returns have also struggled at the same time.
It’s a rude reminder that one of the bedrock tenets of investing — don’t keep too much of your portfolio concentrated in any one thing — doesn’t guarantee success by itself.
But it’s also important to remember that this year’s struggles have been a relative anomaly.
If conditions hold, this may be only the seventh time in the last 46 years that investors would have lost money if they had divvied up their portfolio equally among seven investment groups, including stocks, bonds and commodities, according to the Leuthold Group.
Since 1973, investors would have got a 10.2 per cent annualized return if they had a portfolio that split evenly each year across commodities, large U.S. stocks, small U.S. stocks, realestate investment trusts, 10-year treasurys, gold and foreign developed-market stocks. That’s nearly as big a return as the S&P 500 itself, at 10.4 per cent, with significantly less volatility.
“Given this strategy’s required skill (none) and trading frequency (minimal), the results border on the remarkable,” Leuthold’s chief investment officer, Doug Ramsey, wrote in a recent report.
Stocks around the world have struggled amid worries about slowing economic growth, the threat of the global trade war and the impact of higher U.S. interest rates.
Bonds, meanwhile, have been hit by rising interest rates.
When markets around the world are suddenly shaky, investors often turn to gold for safety. But that, too, has struggled this year, and the GLD exchange-traded fund is down 7.3 per cent in 2018.