Comparing Asset Classes monthly is a little bit like looking up at the scoreboard during halftime. It’s a great opportunity to look at the whole picture, comparing what’s going right, and what’s going wrong. But in the case of investing, the outcome isn’t just losing a game; it’s real money being made or lost.
The scoreboard watching was a little painful last month – with 4 out of the 7 asset classes we track ending May lower than in April. The biggest hit came from U.S. Real Estate, which dropped -7.37% in May, and the losses were enough for one of our favorite bloggers – Mebane Faber – to come out with a chart putting May in perspective by showing the biggest monthly declines of multiple asset classes dating back to 1972…
Chart Courtesy Mebane Faber.
Disclaimer: past performance is not necessarily indicative of future results.
Wait a second… Is it just us or did they leave out a certain asset class… Managed Futures? Referring back to the sports theory here, it’s little hard for the coach to judge how the game is going when you can’t see the ENTIRE scoreboard. To level the playing field, we recreated our own chart to include managed futures, and reorganized the assets from lowest to highest losses.
We had to go all the way back to June of 1984 to find the biggest single month loss for managed futures, at -9.81%. But more importantly, you’ll notice that Managed Futures comes in at the third lowest worst monthly decline, behind only Corp Bonds and the U.S. 10YR (we’re not sure why Mr. Faber lists Corp Bonds, 10yrs, and 30yrs all as asset classes).
Now, this is just the worst loss for the managed futures index, not any one program within the index (or the universe of managed futures for that matter). But the same applies to the EAFE, Large Cap, Small Cap, GSCI, EEM, and REITs – all of which are indices which smooth out the worst loss from any one piece of the index. So, we know a specific investment could see a worse monthly decline than the entire index – but still, a -20% to -30% monthly decline is nothing to shake your head at for these other asset classes.