Reading the “Annual Returns of Key Asset Classes”—what it means for Canadian investors
30 January, 2023 4:30 PMRight off the top, you see that U.S. equities (the S&P 500 index) are often the single top-producing asset class. It topped the list five of the last nine years—from 2013 to 2015, then again in 2019 and 2021.
On the flip side, bonds tend to be the worst asset class. Over the 15 years between 2007 and 2021, at least one bond class was at the bottom seven of those years. Global bonds (as measured by the Bloomberg Global Aggregate Bond Index) in 2010, 2019 and 2021, U.S. bonds (Bloomberg US. Aggregate Bond Index) in 2019, 2012 and 2017, and Canadian bonds (FTSE Canada Universe Bond index) in 2013.
It is interesting that all those years were considered—in retrospect—a multi-decade bull market for bonds. You can imagine how bonds will look going forward, now that interest rates have clearly bottomed and are slowly marching higher.
The chart runs only till December 2021, but as investors know all too well, even bond funds have been under water in 2022, particularly long-term bond funds and aggregate bond funds that contain many long-term bonds. Longer term bonds are even more susceptible to interest rate increases
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