Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 493

Asset Class Gameboard shows all good things must end

It’s an annual highlight when Morningstar releases its Asset Class Gameboard, showing the winners and losers across seven major asset classes over the last 20 years. A glance at the chart immediately tells investors that the leading and lagging asset classes change most years, and it is almost impossible to pick which class will be the 2023 winner. At the start of 2022, how many experts would have nominated cash as the 2022 best performer?

What else does the Gameboard tell investors?

While the chart will not identify future winners, it gives some useful lessons over the years (the chart shows global returns hedged into Australian dollars):

  • Good-to-bad-to-good is common. Many fund managers who shot the lights out in 2020 and 2021 became media darlings, regularly interviewed for their remarkable insights into the future, until the shocks of 2022 made them look like mere mortals. It’s the same with asset classes, suggesting there’s more to luck and randomness than analysts like to acknowledge.
  • Defensive cash won in 2022 but it was at the bottom in four of the five years from 2015 to 2019, and near the bottom until 2021. Cash also did relatively well in 2007 and 2008 during the GFC, but interest rates were noticeably higher. These better returns (in nominal terms) will continue in future putting cash back into the asset allocation game.
  • Australian listed property was bottom in 2020, near the top in 2021 and bottom again in 2022. Good luck picking those wild swings over only three years, suggesting the market’s ability to pick the trends and value real estate cash flows leaves a lot to be desired. Does it also mean that super funds which do not regularly revalue their unlisted property assets are right not to react to market prices every month?
  • Small caps topped 2020 as the pandemic favoured particular niches and growth companies, but they slipped rapidly down the chart in 2021 and 2022 as business models were tested, funding costs rose and some traditional consumer habits returned.
  • There’s a temptation to think returns from Australian and international equities should be approximately the same, as similar factors affect companies around the world. In fact, performance is often remarkably different, with 2022 as a stark example, especially as the currency impact of hedging into Australian dollars is in the numbers.
  • 2022 was the first time only one asset class delivered positive returns (although Australian equities rose when dividends are included) and the lowest return from the winner. This is on the back of exceptionally good returns in 2021.
  • Bond losses, both local and global, were the worse in 2022 over this entire series.

The average per annum performance of each asset class over this sample as in the table below, listed from highest to lowest. As with most long-term series, equities win.

The overarching lesson for most investors looking for consistent returns and balanced risk is that diversification will reduce heavy annual losses that come from concentration, although the best long-term returns are derived from exposure to equities if the risk is not outside the comfort zone. 

Any comments on other information in the charts are welcome.

 

Graham Hand is Editor-at-Large for Firstlinks. This article is general information and does not consider the circumstances of any other investor.

 

RELATED ARTICLES

Not all private markets are ‘volatility laundering’

Diversification lessons from the GFC

The perfect portfolio for the next decade

banner

Most viewed in recent weeks

Australian stocks will crush housing over the next decade, one year on

Last year, I wrote an article suggesting returns from ASX stocks would trample those from housing over the next decade. One year later, this is an update on how that forecast is going and what's changed since.

What to expect from the Australian property market in 2025

The housing market was subdued in 2024, and pessimism abounds as we start the new year. 2025 is likely to be a tale of two halves, with interest rate cuts fuelling a resurgence in buyer demand in the second half of the year.

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

Howard Marks warns of market froth

The renowned investor has penned his first investor letter for 2025 and it’s a ripper. He runs through what bubbles are, which ones he’s experienced, and whether today’s markets qualify as the third major bubble of this century.

9 lessons from 2024

Key lessons include expensive stocks can always get more expensive, Bitcoin is our tulip mania, follow the smart money, the young are coming with pitchforks on housing, and the importance of staying invested.

The 20 most popular articles of 2024

Check out the most-read Firstlinks articles from 2024. From '16 ASX stocks to buy and hold forever', to 'The best strategy to build income for life', and 'Where baby boomer wealth will end up', there's something for all.

Latest Updates

Investment strategies

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

Shares

The case for and against US stock market exceptionalism

The outlook for equities in 2025 has been dominated by one question: will the US market's supremacy continue? Whichever side of the debate you sit on, you should challenge yourself by considering the alternative.

Taxation

Negative gearing: is it a tax concession?

Negative gearing allows investors to deduct rental property expenses, including interest, from taxable income, but its tax concession status is debatable. The real issue lies in the favorable tax treatment of capital gains. 

Investing

How can you not be bullish the US?

Trump's election has turbocharged US equities, but can that outperformance continue? Expensive valuations, rising bond yields, and a potential narrowing of EPS growth versus the rest of the world, are risks.

Planning

Navigating broken relationships and untangling assets

Untangling assets after a broken relationship can be daunting. But approaching the situation fully informed, in good health and with open communication can make the process more manageable and less costly.

Beware the bond vigilantes in Australia

Unlike their peers in the US and UK, policy makers in Australia haven't faced a bond market rebellion in recent times. This could change if current levels of issuance at the state and territory level continue.

Retirement

What you need to know about retirement village contracts

Retirement village contracts often require significant upfront payments, with residents losing control over their money. While they may offer a '100% share in capital gain', it's important to look at the numbers before committing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.