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Making sense of the markets this week: January 14, 2024


2023 asset returns versus the last 10 years

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As we enter the New Year and investing columnists write their prediction columns, it’s also a worthwhile exercise to take a look back at the history of just how varied returns have been across various asset classes. The chart below comes from Wealth of Common Sense blogger Ben Carlson. It shows and the equities shown were available on the major U.S. stock exchanges.

Source: A Wealth of Common Sense

Here’s the Canadian total market data below for comparison. Slide the columns right or left using your fingers or trackpad, or hover your mouse over the table to reveal a scroll bar below.

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 10-year
CAD total market 10.55% -8.32% 21.08% 9.10% -8.89% 22.88% 5.60% 25.09% -5.84% 11.75% 7.62%
Source: SPG Global

My main takeaways from Carlson’s data:

  • The year 2022 was really bad for the value of most assets; 2023 was really good.
  • Commodities saw a real drop from 2022.
  • Despite excellent years for commodities in 2021 and 2022, the 10-year returns remain negative.
  • Reversion to the mean is pretty clear if you look at the last 10 years across all the asset classes.
  • If we go all the way back to the end of 2008, the S&P 500 is up nearly 350%. That’s a pretty incredible run.
  • Bonds have had a pretty rough stretch the last 10 years, only outpacing cash by 0.7% per year.
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I couldn’t track down the total return of Canadian stocks over the past 15 years, but the S&P/TSX Composite Index has increased by more than $2.75 trillion since 1998, when SPG Global started keeping track. That’s a total return of nearly 600%! (Exclamation point warranted.)

So, despite some bad years, for every $1 you invested in the broad Canadian stock market as far back back in 1998, you’d have $6 today. Sure, inflation would have eaten up some of that gain, but that’s still a great run.

Any time we look at these types of charts, we know that people who forecast based on trends of the preceding year are rarely correct. Returns over one-year timeframes are mostly “a random walk.” That said, equities (large-cap, small-cap, U.S. or Canadian) come out on top more often than not.

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Speaking of asset classes, bitcoin exchange-traded funds (ETFs) started trading Thursday, after the U.S. Securities & Exchange Commission approved 11 ETFs tied to the spot price of bitcoin. I’ll have more to say about this next week.

The small short? The big long?

Much of the world was introduced to short selling via the movie The Big Short, based on the book by Michael Lewis of the same name (WW Norton, 2011). When you “short” a stock, you’re essentially placing a bet that the stock’s price will go down within a given period of time. The more it goes down, the more money you make. If it goes up though, the losses can pile up quickly.



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