By Tom Burnett CFA
With only one month remaining in 2021, it is a good time to examine the relative performance of various asset classes thus far in the year. All performance information is derived from the November 30 edition of “The Wall Street Journal.”
One result is very clear—2021 has been a very good year for stocks, but not for bonds as interest rates and perceived inflation threats have risen in the second half of the year. The S/P 500 Index is up 23.9% this year, along with the Dow Jones Industrial Average which has risen 14.8%. Returns on fixed-income assets, however, have been disappointing. The index of Municipal bonds is down 0.7% this year while the High-Yield Corporate Bond Index has fallen by 1.5%. Investment grade bonds are down 3.9% and the Index of 20+year Treasuries is down 5.3%. An index of International bonds has fared better, but is still down 2.5% this year. The Index of Emerging Market Bonds is down 7.3%, one of the worst performing indexes followed by “The Wall Street Journal.”
While all the major stock market indexes show positive performance this year, some country indexes are showing weak performance. The Kospi in South Korea is only up 1.2% and the Shanghai Composite in China has gained just 2.6% this year. In the U.S market, technology, financials, and energy have been the biggest winners. The S/P Energy sector leads all equity groups with a 47.2% increase, followed by the Financials Index at 31.7% and the Technology Index at 30.3%. Small stocks have also done well as reflected in the 22.7% increase in the S/P 600 Index this year.
Commodities present a mixed picture this year. The leading performance is led by natural gas which has risen 91.2% this year. Crude oil is up 44.2% and gasoline has risen 47.5%. On the other hand, silver is down 13.4% and gold is down 5.9% so far this year. Many observers expect the gold-silver complex to rally sharply if inflation becomes an imbedded problem, but returns on those precious metals have not provided comfort to their investors so far in 2021.
Tom Burnett CFA is Director of Research