How Have Various Asset Classes Performed in 2020?

Asset class performance

To say that 2020 has been an eventful year would be an understatement.

A once-in-a-century worldwide pandemic led to unprecedented levels of government and central bank intervention.

In turn, the combination of a macro shock with the fiscal and monetary response has led to some pretty interesting developments in the capital markets.

While my own portfolio primarily consists of US equities, I thought it might be interesting to have a look at the performance of some of the other assets the “mainstream” investor might find in his / her portfolio.

US Equities

It’s no secret that the equity market, in particular the US one, has been on fire (no pun intended!) lately.

I am still shocked to see the S&P 500 starting with a “3”, let alone something approaching the ~3,500 territory. And yet, this is the world we find ourselves in:

S&P 500 YTD

However, the overall market performance masks a clear bifurcation between large-cap and small-cap stocks.

Large caps (Portfolio 2 below) have performed remarkably well.

In contrast, small caps (Portfolio 3), have suffered a disproportionate drawdown at the depths of the market shock, and have lagged in performance since.

Portfolio 1 represents the overall US stock market performance. Given it’s essentially a weighted average of the two, it’s not surprising it has tracked the large caps.

US Equities

We are clearly in an economic environment that favours scale. Large enterprises remain resilient while SMEs are suffering, or so the argument goes.

The large-cap performance, however, hides a bifurcation of its own.

The largest stocks in the S&P 500 (Microsoft, Amazon, Apple, Alphabet, Facebook) have had an incredible run. They now represent just under 25% of the index and are the real reason the S&P has held up so well.

For all the other stocks, it’s a different story. As they say, the S&P 494 is still deep in the bear market.

What I find fascinating (and not in a good way) about small-cap performance this year is that not only they underperformed in absolute terms, but they also had a much higher standard deviation (41% vs 30% for large caps).

Proponents of small-cap investing (i.e. French-Fama), acknowledge the higher volatility, but argue that higher returns more than compensate for the increased risk.

This year, we’ve certainly had the risk – but not the returns.

International Equities

Anyone believing in American exceptionalism can certainly point to the stock market as a proof point this year.

US equities, as denoted by the blue line below (Portfolio 1) have been the clear winner this year:

International Equities

Global equities (Portfolio 2 – red line) are still deeply underwater.

And European stocks, which haven’t exactly had an auspicious decade, have fallen even further behind this year.

Only time will tell when the tide will turn.

Fixed Income

Let’s now have a look at the performance of portfolios with a fixed income component. Have bonds come through with the investor protection they are supposed to offer?

Portfolio 1 below denotes the US Stock Market index.

Portfolio 2 assumes a 75% allocation to US stock with 25% in US bonds.

Finally, Portfolio 3 assumes a relatively conservative 50 – 50 mix between the two asset classes.

Fixed Income

As you can see, investors with bond holdings are in a good place this year.

Not only their absolute returns are higher, but the volatility (as denoted by standard deviation) is also significantly lower than that of a 100% equity portfolio.

To the extent you get jittery when the markets get choppy, it may well make sense to have an allocation to bonds in your portfolio.

Just remember that it isn’t a free lunch. Over long periods of time, equity returns trump bonds by a wide margin:

Bonds vs stocks

Here’s a detailed post that reviews the performance of stock and bond portfolios over the past 30 years.


I don’t invest in gold and I don’t recommend that others do, either.

There’s probably a whole post I could do on this topic, but instead, I’ll refer you to an excellent write up from Dollars and Data which summarizes all the key points nicely.

The gold investment thesis has certainly proven out this year.

A 50 – 50 equity and gold portfolio (#3 – orange line below) has beaten both the US stock market (portfolio #1 – blue line) and a 50 – 50 equity and bond portfolio (#2 – red line):


It’s not surprising to see an influx of money into gold at times like these. And to be fair, the bet would have been warranted, this year.

Make no mistake, however, long-term returns present a different picture:

Stocks vs Gold

Portfolio 1 above is the US stock market, Portfolio 2 is gold.

It’s clear, over long periods of time, holding gold is likely to be detrimental to your investment returns.

And anyone waxing lyrical about gold today should also acknowledge that it has underperformed for most of the past decade.

That being said, it may well have a place in one’s portfolio, though I’d still prefer bonds for diversfication.

Lessons Learned

If anything, the market’s performance this year is a very helpful reminder of how unpredictable it is in the short run.

Long-run performance, however, is nothing short of consistent. It requires no commentary:

S&P 500 log scale

So unless you are one of the people who can beat the stock market, the only option you have is to follow the steps below:

Step 1: Construct a portfolio that reflects your investment horizon and risk appetite.

Remember – if you are going to lose money in the stock market over long periods of time, it is because you’ve sold after a correction.

Stock market returns take a hit if you waverUsually, this happens because you lose your nerve – or liquidity. Avoid being in either situation.

Step 2: Invest in a broadly diversified, low-cost equity and bond tracker funds.

Fees can and will decimate your investment returns. Pay attention to them.

Buy yourself a nicely diversified world index tracker, supplement with bonds as appropriate, and set up an automatic top-up program.

Step 3: Prosper

That’s all there is to it.

Happy investing!

About Banker On Fire

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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.

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12 thoughts on “How Have Various Asset Classes Performed in 2020?”

  1. Thanks for this summary, it’s a great overview – and also for the link to the Dollars and Data gold post. I would still love to hear your take on the subject, though. Being Swiss, a lot of people both in my family and our/their circle of friends are advising me to ‘buy gold now’ – but I always reply that it’s not the greatest of ideas.

    1. I really struggle with gold. It doesn’t produce income, costs money to store, and has little intrinsic value.

      To me, those are the reasons why the return on equities trumped gold by a wide margin over the past century.

      Now, I do see value in having gold as a way of reducing your portfolio’s volatility, but why not use bonds to accomplish the same objective? You also get a kicker in the form of interest income, however pitiful it may be today.

      That being said, some people just love the idea of owning gold, and will not be dissuaded!

      1. I have come around to gold and now have c. 10% in my portfolio. There is no longer an opportunity cost vs. holding bonds since they have negative real and/or nominal yields. Can bonds really get much more expensive at this point? I think there is much more upside potential with gold as it becomes a part of an increasing number of portfolios and fiat currency is devalued by rapid expansion of the money supply.

        Sticking my neck out, I believe inflation is going to make a comeback. It’s the only way to reduce debt levels. (Explained much better than I can: )

        1. You make a good point on the reduction in the opportunity cost of gold vs bonds given negative yields.

          I do think inflating your way out of a debt problem is potentially a solution. That being said, central banks have just spent a decade trying to rouse inflation, with no result.

          Also, equities are typically a good hedge against inflation, as long as it stays at reasonable (i.e. single digit) levels.

          Come to think about it, issuing debt with negative yield is another way of getting more today and paying back less tomorrow, isn’t it?

  2. Another really insightful article BoF. I do think gold has a place within a wealth retention or retirement portfolio but I’m not convinced of its merits during a full-on accumulation phase.

    What’s your view on holding a small percentage of cash within your SIPP? Should you be fully invested at all times?

    1. Cheers Rob.

      Interesting question. On reflection, I would hold cash in your regular savings account, or an ISA if you have excess room.

      If it’s sitting in your SIPP, it’s not really accessible for a long period of time, so might as well invest it for extra return.

  3. I’ve recently found your site and very much appreciate how you are able to present your articles in a way that is easy to read and understand. I read way too many other sites that struggle with this or think that more is better. Thanks for what you do.

    1. Many thanks Jim. Comments like yours honestly make my day.

      Glad you are enjoying the site and look forward to seeing more of you around here!

  4. Another great post.

    Ps I’ve been singing your praises to all who will listen and have suggested the Choose FI podcast get in touch with you to see if you’d ever consider doing a UK focused FIRE episode with them. Would be immensely helpful to so many in the UK.

    1. Thanks a lot Sarah!

      Have spent time on the ChooseFI FB group in the past. Think they do a great job helping people along.

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