Skip to Content

What does the breadth of last year’s decline suggest for the coming years?

The breadth of last year’s negative returns was unusual but not without some precedent. The good news is that prior episodes have been followed by a much more favorable environment in the years that followed.

nearly all asset classes lost money in 2022 chartLast year was a challenging one for investors, with both stocks and bonds posting negative returns. In fact, last year’s market decline was among the broadest based in recent decades, with nearly all asset classes posting negative returns to varying degrees, leaving very few places for investors to proverbially hide.

As shown in the chart above, 94% of Morningstar’s U.S. mutual fund categories recorded negative average returns for the 2022 calendar year — a nearly universal negative year rivaled only by the global financial crisis in 2008. Out of the 112 distinct Morningstar mutual fund categories with performance data for 2022, only seven posted positive average returns over the calendar year period. What were these categories that managed to do so? Most were focused on commodities or natural resources that were lifted by the surge in energy prices last year; others directly or indirectly benefited from that same trend. That was a meaningful change for commodities, which had been among the worst-performing asset classes of the past decade.

Is there a silver lining? As illustrated in the chart, such extreme periods in which virtually all asset classes are negative have typically been followed by periods in which the overwhelming majority of categories provide positive returns. From 1990 – 2021, there were three other calendar years in which more than 70% of Morningstar categories experienced negative returns. In each case, positive returns followed for most asset classes, typically for multiple years.

Whether something similar plays out in 2023 and beyond remains to be seen. Still, if history is any guide, last year’s widespread negative returns across most asset classes are unlikely to be repeated over the next few years.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

Related Thinking

People sitting around a conference table talking
January 19, 2023

How did last year’s equity market volatility compare to history?

Blog 1 min read
Person holding iPad in conference room
January 12, 2023

The consumer price index falls for the sixth consecutive month

Blog 3 min read
Warehouse shelf filled with boxes
January 4, 2023

Manufacturing activity slowed again in December

Blog 2 min read