In 2022, both stocks and bonds had bear markets simultaneously. This caused heavy losses in allocation/balanced portfolios as well as risk-parity portfolios. Bonds failed to moderate declines due to stocks and, instead, contributed significantly to portfolio losses. Reasons were many - rapid Fed tightening, strong dollar, high inflation, post-pandemic fragile economies, recession fears, Russia-Ukraine war, supply-chain disruptions, chaos in oil/gas markets, etc. Purpose here is to record how bad things were by 2022/Q3.
Allocation/balanced portfolios were the 2nd worst with -21% 2022YTD (the record was -27.3% for full 1931). Other bad (full) years with double-digit % declines were 1930 (-13.3%), 1974 (-14.7%) and 2008 (-13.9%). Table below is from Twitter LINK1
Risk-parity portfolio performance was among the worst in history. These portfolios try to equalize volatilities of stock and bond portions and then use leverage. Twitter LINK2
There is growing appreciation for multi-asset funds that include stocks-bonds-alternatives. Prominent examples of these are FMSDX, VPGDX. These have to be battle-tested in future, but by 2022/Q3, their performance was FMSDX -16.80%, VPGDX -16.12% and that compared well with traditional moderate-allocation index fund VBINX -20.85% (active moderate-allocation funds were around this).
It was bad, but far from the worst year for SP500. Twitter LINK3
Image with 60-40 Table https://pbs.twimg.com/media/FeJ8OKuXwAMqguu?format=png&name=small