Financial Markets & Historical Asset Class Returns

Bull Market

20% up from trough; mature from optimism and die in euphoria
once we've hit the bottom (we've had a big sell off we've entered a bear market from the bottom), If we go up 20% we have registered the start of a new bull market

Bear Market

20% drop from peak


10%-19.9% rise/drop from trough/peak

Why was cash "King" 2018?

Cash provided the most upside
Fixed income, Real Estate, High yield Bonds, Caps Stocks, and commodities gave low or no returns

Based on the 120 year history in the Credit Suisse Yearbook, U.S. equities had an annual return of ____ in nominal terms.


It was hard to ______ money in 2019

Commodities had high returns (30-year treasury rate was 16%), cash had low upsides

The longest running bull run in the U.S (2009-2020) also highlights...

growing income inequality
(most Americans aren't invested in the stock market thus don't participate in the upside)

What killed the longest bull run in the U.S in 2020

Covid-19 pandemic

What was the unemployment spike in 2020?
What was unemployment entering 2021?

15%; 6.7%

Don't fight the Fed

an investment policy that suggests investors should align their choices with the actions of the Federal Reserve System, or Fed
buying stocks when interest rates are low and avoiding stocks when interest rates are high

10 year treasury yield as of 2021

slightly above 1%
historically low

How much of bonds are trading negatively globally?

$18 trillion

2 benefits of weaker U.S dollar

1. most commodities are prices in USD thus more affordable for countries
2. Makes U.S exports more competitive

What metal has been a good gauge of global growth?

(especially China of which their use is 40%-50%)

Why did oil have negative yields in 2020?

demand fell while supply rose and storing oil is costly

Which nations own most of the market share of Equity as of 2020?

U.S (54.5%)
second is Japan (7.7%)

Highest asset class returns in order (3 things)

1. Equity (9.6%)
2. Bonds (4.9%)
3. Bills (3.7%)

Wharton's views on historical returns for U.S investors

U.S investors have historically always enjoyed a positive real return as long as they've been able to hold their shares for at least 20 years