2022 Stock and Bond Returns in a 97-Year Perspective
- 2022 was a disappointing year for both stock and bond investors
- The real (inflation-adjusted) 25% loss in stocks is in the bottom decile
- The real 20.3 bond loss is the worst in the past 97 years, and greater losses could lie ahead.
The following 2 histograms and table provide perspectives on stock and bond performance in 2022.
Stocks, as measured by the S&P500, lost 18.6% which is a 25% real (inflation adjusted) loss, placing 2022 in the bottom decile of stock returns over the past 97 years.
Bonds, as measured by the Vanguard Total Bond Index, lost 13.7%. this is -20.3% inflation adjusted, making it the worst annual bond return in the past 97 years.
The following table shows stock, bond, T-bill and inflation for the full 97 years and broken out by quinquennial and decade. The current quinquennial and decade have been the worst for bonds, losing 0.5% per year over the past 5 years and earning only 1% per year over the past decade. Bond losses in 2022 were the worst over the past 97 years.
Conclusion
It’s official. Bond losses in 2022 are the worst in our 97-year history. Yet the 10-year government bond yield is only 4%. Historically bonds have yielded 3% above inflation, which is 10% in a 7% inflationary environment.
Bond losses could conceivably continue into 2023. The worst might not be over. Similarly, stock losses reflect a gradual relief in the superbubble that has built up over the past 13 years. Rising interest rates will generate further stock price declines. We are in a regression toward the mean, but the mean has not yet been reached.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Ron Surz
Ronald Surz is co-host of the Baby Boomer Investing Show and president of Target Date Solutions and Age Sage, Target Date Solutions serves institutional investors, namely 401(k) plans. Age Sage serves do-it-yourself individual investors. His passion is helping his fellow baby boomers at this critical time in their lives when they are relying on their lifetime savings to support a retirement with dignity, so he wrote a book Baby Boomer Investing in the Perilous 2020s and he provides a financial educational curriculum.Ron Surz is president of Target Date Solutions, developer of the patented Safe Landing Glide Path, Soteria personalized target date accounts, and Age Sage do-it-yourself investing. He is also co-host of the Baby Boomer Investing Show.
Read Ron's Bio