It has been a very good year for stocks with large company stocks up 15.3% through June 30. This year has not been as kind to the bond market and real estate which were down year to date. Commodities saw a decent return of 5.4%. Over the past decade large stocks have had an average return of 12.8%. Real estate had an average return of 5.3% for the decade. Bonds had a most return that did not match inflation while commodities had a small loss for the decade.
Let’s drill down into different types of investments. The table below shows returns for investable ETFs representing the most common investment types. We like to use ETFs versus indices to evaluate returns as they include transaction cost and fees while indices do not. In this update we will examine the performance of each major investment type through the end of June 2024.
Stocks
Large company U.S. stocks were up substantially year to date. Large cap stocks had a 15.3% return year to date. Technology stocks rebounded with a boost from Artificial Intelligence spending and had a return of 17.3% year to date. Value ETFs, such as VTV, lagged the overall stock market at a return of 8.7% year to date
International stocks lagged US stocks with a return of 4.8% year to date. Small company stocks were up modestly at 1.6% year to date.
Bonds
The bond market overall mixed for the has been mixed year to date with long and intermediate term bonds down slightly and short term and inflation protected bonds up slightly. The best low risk opportunity in bonds remain 4-to-6-month U.S. Treasury bills which are yielding about 5.3%.
Alternative Investments
Alternative investments can include real estate, commodities, private capital, and a variety of other investments. Here we include two traded ETFs representing real estate (VNQ) and commodities (DBC). Real estate was down 3.2% year to date while commodities were up 5.4%.
Diversified Portfolios
There are some iShares ETFS representing different levels of diversification from about 40% stocks and 60% bonds to 80% stocks and 20% bonds. Most diversified investors have portfolios with between 60% and 80% stocks depending on their ability and willingness to take risk. These diversified portfolios were all up year to date with returns from about 3.1% for a 40% stock portfolio to about 8.6% for an 80% stock portfolio.
Looking Forward
Thus far the Federal Open Market Committee has managed to slow the economy down by raising interest rates without pushing the economy into a recession. Risk remains that they could keep rates high for too long or that other events might cause a U.S. or global recession. Overall stocks are also priced at a high level relative to history. I would therefore expect more modest stock returns over the remainder of this year. There is a possibility however that once the fed begins lower rates that strong stock performance could continue, particularly with a tailwind from AI. The bond yield curve (see US Treasury Yield Curve) remains inverted with the best yields available for short-term bonds. At some point there will be more attractive opportunities for intermediate term bonds, but not yet in our view.