Total Return Ratio
A large swath of the institutional asset-allocation world is engaged in the sometimes dangerous, binary game of “stocks versus bonds.” Although the 2022 bond debacle caused relatively mild damage to a massively overweight equity position, the bear markets of 2000-2002 and 2007-2009 produced losses for stocks versus bonds that exceeded 60%.
Foreign stocks have been leaders off last fall’s lows, but not by a big enough margin to flip our Emerging Market Allocation Model to a bullish stance. The model factored into our general avoidance of EM equities the last several years; now January’s action has us on alert that the outlook may soon shift.
The bull market took out another old record last month when the S&P 500 topped the cumulative total return of the 1949-56 upswing. The total return since March 9, 2009, is now 468%. Since the highs of March 2000, the S&P 500 cumulative total return is actually a few basis points behind U.S. 10-year Treasury bonds.