Take a look at the asset winners and losers in 2020

We’re halfway through 2020, and the year has already been a rollercoaster. We’ve seen a global pandemic, record unemployment and racial protests across the country. And let’s not forget, there’s a presidential election campaign season in full swing.
 
Of course, the events of this year have rocked the financial markets. Between February 19 and March 23, the S&P 500 fell 33.93%. Then, from March 23 to June 18, it rose 39.24%.1
 
The quick rebound is certainly good news. However, given the COVID-19 pandemic is still ongoing and the election lead-up is intensifying, there’s no guarantee that the markets will stay on a positive trajectory. In fact, it’s possible the next six months could be just as volatile as the last six months.
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Asset Class Winners and Losers

Believe it or not, there are some asset classes that have actually had positive returns through the first half of this year. Below are the major asset classes that have had positive returns from January 1 through May:2

• Gold: 14.0%
• U.S. Investment Grade Bonds: 5.5%
• Treasury Inflation Protected Securities: 4.8%
• U.S. Dollar Index: 2.0%
• Cash: 0.5%
• Foreign Developed Market Bonds: 0.1%

 
Of course, many of those assets, like gold and cash, are traditionally assets that investors turn to during times of volatility. Other asset classes haven’t fared so well. Here are the asset classes that declined through May of this year:2

• Foreign Government Inflation-Linked Bonds: -0.4%
• Emerging Market Government Bonds: -2.4%
• Foreign Investment Grade Corporate Bonds: -3.5%
• U.S. High Yield Bonds: -5.1%
• U.S. Stocks: -5.6%
• Foreign High Yield Bonds: -7.2%
• Foreign Developed Market Stocks: -14.3%
• U.S. REITs: -20.08%
• Commodities: -21.2%
• Foreign REITs: -22.7%

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The Importance of Diversification

It’s impossible to predict what each asset class will do in the short-term. That doesn’t stop people from trying though. Very often short-term predictions turn out to be inaccurate.
 
For example, at the beginning of 2020, one major investment company said it was bullish on stocks and bearish on gold, both of which turned out to be inaccurate predictions.3 Of course, they couldn’t predict the oncoming pandemic, but that’s just one example why it’s never wise to predict returns of certain asset classes.
 
A more effective approach is to implement a diversified strategy that incorporates a wide range of asset classes. That way, you get positive returns from the winning asset classes to offset losses in other areas.
 
Please keep in mind that losses may create an opportunity for tax-loss harvesting in non-qualified accounts. Make sure that you discuss these opportunities with both your tax advisor and investment advisor in order to potentially mitigate capital gains taxes by realizing some capital losses.
 
We can help you find the right approach for your needs and risk tolerance. Contact us today at Emerald Blue Advisors. Let’s connect soon and start the conversation.
 
 
1https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_y6rwXoqdG8qStAaXrrz4DA1:0
2https://seekingalpha.com/article/4351432-major-asset-classes-may-2020-performance-review
3https://apinstitutional.invesco.com/home/2020-outlook-global-market-strategy-asset-class-outlooks
 
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