Video Transcript
Hey, everyone. I'm Nolan Mauk, investment research analyst here at Orion with another quick check-in on current market volatility.
During such a fast paced and headline driven time in the markets, it's been difficult to focus on anything outside the present.
This week, I wanted to zoom out a bit and take a look at volatility and asset class movement from a wider lens. This chart from our OPS reference guide is a favorite among many advisors and helps provide some perspective on current volatility.
Each rectangle in the chart represents the annual performance of a major asset class since 2000. Also, keep an eye on the dark green square, which represents a 60/40 portfolio of global equities and bonds.
A few key takeaways jump off this chart, all of which highlight that year-to-date market performance, while it's been challenging, is not outside of normal expectations.
First off, the role of diversifying asset classes in long-term portfolios is evident.
While global equities have seen extreme highs and lows over the years, not a single year has passed in which every asset class declined. In the worst years for stocks, diversifying asset classes have helped to mitigate losses for globally balanced portfolios.
And so far in 2025, we're seeing that trend continue.
Despite the correction in US markets, international equities, bonds, and many real assets like commodities remain positive on the year. And the globally balanced portfolio is down just over 1.5% year-to-date, far easier to stomach than the 10% drop we've seen so far in the S&P 500.
Second, this chart really highlights the power of positive expectations.
As you can see, most asset classes have come in over the 0% line, demonstrating that investing is not a zero sum game. There have been more winners than losers over time, providing a powerful endorsement for investing as a strategy for long-term success. Finally, this chart illustrates the existence of investment regimes and the potential for regime changes.
For example, in the first decade of the century before the financial crisis, emerging and developed international markets outperformed the US market on a consistent basis. Value stocks in the US outperform their growth counterparts, and small caps somewhat consistently outperform large caps. More recently, those regimes have changed, and the last decade has been dominated by US large caps and growth stocks.
Over the long term, active management can help enhance short-term returns to balance portfolios throughout these cycles of outperformance, but a diversified mix of asset classes helps portfolios capitalize on areas of the market that are working in the current environment. Thanks for watching, and as always, please reach out to us with any questions.