What a difference a year makes. How about 30?
Originally posted on January 12, 2024.
A year ago (January 2023) we were licking our wounds after one of the worst years ever in both stocks and bonds.
At the time, we wrote a newsletter that said in part, “If you suspect that you won’t touch the money until 2028 or beyond, you might continue to consider stocks as a powerful path to building wealth.”
What a difference one year can make. The stock market rallied more than 24% in the 2023 calendar year after falling over -19% in the 2022 calendar year. As of today, the S&P 500 is within spitting distance of all-time highs last reached in January 2022.
Many people dislike the endless volatility of stocks, and who can blame them. The huge swings up and down often have clients wondering, “What are some alternatives to stocks in my portfolio?”
There’s no doubt about it, the stock market can be a wild ride. But when it comes to the potential to turn a little bit of money into a lot of money over time, it’s hard to recommend anything else for long-term investors. Consider the following chart from Bespoke Investment Group (used with permission):
If you’re reading this on your phone and the chart is too small to see, the takeaway is that the green line is stocks, and the yellow, blue, purple and gray lines are gold, residential real estate, bonds and commodities, respectively. Stocks have blown other asset classes out of the water over 30 years.
Though we may choose to add something like gold, residential real estate, bonds and/or commodities as part of a diversified portfolio, the fact is they have not grown nearly as much as stocks over the prior 30 years, and they are not expected to over the next 30 years.
While the chart accurately points out that stocks “trump” other asset classes over the long run, it’s worth mentioning what’s top of mind for almost every investor we talk to these days: The 2024 Election. Stay tuned, next month we’ll be talking about the danger of getting political when it comes to investing.
Until then, we hope you’re having a lovely start to 2024. Talk soon!
Sara, Kacie, & Amy