Over the last 25 years, we’ve seen a lot of different regimes in the stock market. We had the tech bubble bursting in the early 2000s, the long recovery through 2007, the great financial crisis of 2008-2009, one of the longest bull markets ever from 2009 – 2020, COVID, rising inflation in 2022, and the subsequent bear market, and the current rally we’re in now.
Within those 25 years, we’ve seen low interest rates and inflation, high interest rates and inflation, a few wars, a developed country going bankrupt (Greece), tax reform, an AI boom, and the adoption of technology in everything we do.
Given everything that’s happened in the last 25 years, I’ve wondered, what would have been the best investment to put your money in if you could rewind to the year 2000.
We could look at this from a lot of perspectives, but to simplify it we’re going to look at four main asset classes, stocks, bonds, cash, and gold.
Here is how an initial investment of $10,000 into stocks, bonds, cash, and gold from Jan 2000 to June 2024 would have grown in order from best to worst:
Gold (spot price) $80,890
Stocks (S&P 500) $57,690
Bonds (US Bloomberg Agg) $25,830
Cash $15,230
I was surprised to see that Gold dominated all four asset classes. More than tripling bonds and 5x more than cash.
What’s important to point out here is the results of this exercise depend heavily on the period you choose. For example, what if we just rewound this back three years and looked at 1997 – 2021?
Stocks (S&P 500) $102,540
Gold (spot price) $48,900
Bonds (US Bloomberg Agg) $33,390
Cash $16,350
Stocks doubled gold during this period! And almost doubled the return it had compared to the previous 25-year period we looked at.
The conclusions I draw from this exercise are pretty simple:
1) In every 25 year period I’ve ever looked at, all investments have a positive return, so stay invested.
2) Asset class performance varies based on different regimes, so stay diversified.