YTD Asset Class Returns
Diversification beyond US stocks and bonds is paying off. US stocks have earned 6% through 4/30/26, and U.S. bonds have eked out a 0.1% return. By contrast, crude oil is up 113%, and commodities are up 49%.
Diversification Benefits
The target date fund (TDF) industry is mostly invested in US stocks and bonds, which have been outperformed so far this year by other asset classes. Consequently, diversified Soteria funds are outperforming.
Are your investments diversified?
Economic indicators are flashing red while the stock market soars
US stocks are up 30% for the year ending 4/30/26 and are forecast to continue rising. But the US economy is weak, as revealed in economic indicators.
Our debt has reached levels last seen after World War 2
Our individual share of our $39 Trillion debt (with a T) is $357,000 and growing about 5% per year. Debt-to-GDP has reached 122%, exceeding the 121% level reached after WWII.
We owe a lot, but no one wants to pay. We’re handing the bill to future generations who will eventually refuse to pay, leading to the inflationary effects of monetization.
Conclusion
These are challenging times that warrant concern and protection.
Venezuela’s stock market taught a lesson in 2016 when the Venezuelan stock market performed best in the world while its inflation skyrocketed, earning 114% versus 13% on the Dow. This event has direct application to the recent US stock market. Some believe that stocks protect against inflation, but stocks are actually not a good inflation hedge.
As summarized in this JP Morgan article, the better inflation hedges are:
1) Commodities and gold
2) Core real asset alternatives: real estate, infrastructure, and transport
3) Less-correlated hedge fund strategies (e.g., macro hedge funds)
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