The Surprising Asset Class That Dominates Late-Cycle Markets

With markets trading at record highs, many economic indicators suggest we are in the middle-to-late expansion phase of the business cycle. Looking at the past 50 years, historical performance shows that commodities have been the strongest-performing asset class during this stage, delivering average returns of 27%. Large-cap value stocks have followed with average returns of 9%, while U.S. Treasuries have returned approximately 8%. In contrast, small-cap stocks have significantly underperformed, generating average returns of just 1% to 3%, lagging not only larger companies but even government bonds.