Most of the time that we see or produce performance comparison charts, either a stock index (such as the S&P 500) or a bond index (such the US Aggregate Bonds) is the base. However, cash might be a reasonable base to use as well. We can’t spend stocks and we can’t spend bonds. We can only spend cash, which seems like the real world’s most reasonable minimum performance benchmark.
Since few of us actually put cash in our mattress or a coffee can, and instead put it to work in short-term, very safe assets, let’s use the Barclay’s Short-Term (1-12 months) Treasuries index (proxy SHV) as our cash measure, and then compare several key asset categories to that.
The first two charts show the relative performance over 2 years weekly and YTD daily for VEU (world ex US stocks), SPY (US stocks), BND (aggregate US taxable bonds), UUP (US Dollar versus basket of currencies) and DBC (global currency basket).
click images to enlarge
Weekly 2 years
Daily YTD
US Aggregate Bonds (proxy BND or AGG) are ahead of cash for both time periods.
US stocks (proxy SPY or IVV or IWV or VTI), world stocks ex US (proxy VEU) and global commodities (proxy DBC) were all ahead of cash for a while this year, after a sickening fall in the first quarter, but all except world excluding US stocks are now once again below cash. They are not far below, but still below.
This chart shows that most major US bond types, except junk bonds, are ahead of cash.
Major US Bond Types vs Cash
This chart shows that local currency denominated developed market sovereign debt is ahead of cash, and that Dollar denominated emerging market sovereign debt took a major hit at the height of the crisis, but is strongly recovered and approaching parity with cash.
US and International Bonds vs Cash
A health slug of bonds still makes sense to us at this time for most portfolios.
Richard Shaw
QVM Group LLC