Performance of Gold vs. Stocks, Bonds and Commodities: Chart

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Gold is an important asset class to own in a well-diversified portfolio. However investors always wonder if gold is better than assets like stocks bonds, stocks and commodities. Gold is also known to be a great asset to beat the raves of inflation. An article in the journal last month noted that gold has underperformed stocks over the past 50 years. Since August 1971, the annualized return on the S&P 500 is 11.2% including dividends reinvested while gold produced an annualized return of just 8.2%.

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Source: Gold as an Inflation Hedge: What the Past 50 Years Teaches Us, WSJ

From the article:

Gold is only a good inflation hedge over time frames far longer than any of our investment horizons, according to research conducted by Duke University professor Campbell Harvey and Claude Erb, a former commodities portfolio manager at TCW Group. They found that it’s only when measured over very long periods—a century or more—that gold has done a relatively good job maintaining its purchasing power. Over shorter periods its real, or inflation-adjusted, price fluctuates no less than that of any other asset.

Even a small allocation of gold in a diversified portfolio can improve the risk adjusted returns. This is because historically gold has a positive correlation to rising risk assets and negative correlation to falling risk assets. To put it simpler ways, it means when risky assets such as stocks are falling then gold would rise and vice versa.

The following table shows the performance of gold vs. stocks and commodities during major risk-off crisis events in the past 30 years.

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Source: The case for a modest allocation to gold in super funds, FirstLinks

During the Global Financial Crisis (GFC) of 2008-09, the S&P 500 plunged 48%. During this time gold almost increased by bout the same percentage.

Related ETFs:

  • SPDR S&P 500 ETF Trust (SPY)
  • SPDR Gold Trust (GLD)

Disclosure: No Positions

Australian Stock Market – Up and Down Months Since 1875: Chart

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The Australian stock market has had many up and down months since 1875. However over the long term since that year the market has gone higher. The number of up months has been more than the number of down months. The following chart shows the performance of the Australian stock market since 1875:

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Source: Longest positive run for Australian shares since WWII by Ashley Owens, FirstLinks

The longest positive run lasting 14 months was from April 1942 to September 1943. After World War II, the longest positive run of 11 months ran up to August of this year.

Related ETF:

  •  iShares MSCI Australia ETF (EWA)

Disclosure: No Positions

The S&P 500 Dividend Yield is at a 20-Year Low

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The S&P 500 closed at 4,458 on Friday. The index is up over 20% as of last Friday’s close and has reached 54 records so far this year. The P/E ratio stands at over 34, well above the historic levels at around 20. At current levels, US stocks are expensive indeed. However that does not seem to stop investors’ attraction towards equities. In fact, as recent as last quarter even foreign fund managers were pouring money into the red-hot US equity market.

I have written many times before that the dividend yield of the S&P 500 has stayed low. It has been under 2% for a few decades. The dividend yield reached a 20-year low of 1.32% as of September 10th. This rate is well below the annual inflation rate according to an article by Frank Holmes at U.S. Global Investors.

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Source: Remembering 9/11 on the 20th Anniversary, U.S. Global Investors

With dividends so low, an argument can be made that investors are betting on the greater fool theory. Whether a stock is at $100 or $500 or even over $1,000 they are buying them anyway in the hope that they can unload it some other fool who is willing to buy at even higher prices. It remains to be see how long this logic will work.

The following chart shows the dividend yield of the S&P 500 since 1870:

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Source: Multipl.com

With multiple headwinds facing the US economy and the P/E ratio at above historic mean levels, caution is warranted with investing in stocks.

Related ETF:

  • SPDR S&P 500 ETF Trust (SPY)
  • iShares Select Dividend ETF (DVY)

Disclosure: No positions

The 2021 Vanguard Index Chart: Australian Edition

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Vanguard Australia has published the 2021 Vanguard Index Chart. This powerful chart shows the importance of long-term investing and the benefits of diversification over various asset classes. In the long run, US stocks beat Australian stocks and other investment types. An A$10K investment on July 1, 1991 would have grown to over A$217K if invested in US stocks. That equals to about 10.8% per year. Australian stocks earned 9.7% per year over the same period. An investor that simply kept the money in a bank would have seen the initial A$10K grow to just about A$39K.

The chart also shows the leadership changes in the US and Australia since 1991 and major events such as the Global Financial Crisis(GFC), Brexit, etc.

The following chart from showing the returns of various asset classes from July 1991 to June 2021 for the Australian market:

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Note: The dollar figures shown above are in Australian dollars

Source: Vanguard Australia

Related ETF:

  • iShares MSCI Australia ETF (EWA)

Earlier:

Disclosure: No Positions

Fact of the Day: Number of Stocks Bought Back by Apple

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US tech giant Apple(AAPL) is the most valuable company in the world. Currently Apple has a market capitalization of $2.50 Trillion. On Tuesday the company has scheduled its latest hardware unveiling event. Some investors are hoping the upgrades to iPhone and other products would help propel the market cap to $3.0 Trillion soon.

Apple is one of the top companies to buy back its own shares. According to a journal article this weekend, over the past decade has bought back $442 billion of its shares. The current total outstanding stock count is 16.5 billion. Over the past 5 years, outstanding shares have decreased consistently from over 21.0 billion to the current 16.5 billion. This is due in part stock buybacks.

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Source: YCharts

On Friday Apple closed at $148.97 and has a current dividend yield of 0.59% or $0.88 per year.

To put Apple’s market cap in perspective, the GDP of the US in 2021 is estimated to be around $22.7 Trillion.

In the past 5 years, the stock has shot up by over 418% excluding dividends:

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Source: Google Finance

Disclosure: No Positions

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