If 2022 ended today, it would rank as the 8th worst calendar year performance for the U.S. Equity Markets. However, as we all know, very few investors are 100% S&P 500 exposure. Therefore, to see how a traditional 60% equity/40% fixed income portfolio would have done we looked back over the previous 100 years. In doing so, this would rank as the 6th worst calendar year performance – ranking between the Great Depression of 1930 and World War II in 1941.
However, we also know that we aren’t investing for a single year, but over multiple years. As such, if we can zoom out slightly and look at a period of 5 years instead of 1 year, we will find that there are only 4, 5-calendar year stretches, where a 60/40 was negative and all of those occurred between 1927 and 1941. If we zoom out even further and instead look at a 10-year time horizon, one will find zero instances where a 60/40 portfolio was negative over that timeframe. The worst performing 10-calendar year stretch was from 1928-1938, returning a total of +19.5% over that timeframe. Therefore, while this year may feel tremendously horrible, especially since we haven’t experienced a prolonged stretch like this in the last 10+ years, we must also be able to zoom out and see the forest, not the trees.