The Weekly Brief
13-01-2025
Thought of the week
As 2025 gets underway, news headlines are already moving markets. Uncertainty around US tariff policy, European elections, and global geopolitics - amongst other worries - might tempt investors into sitting in cash. However, history suggests this would typically prove the wrong approach. Looking at a selection of 10 economic and geopolitical shocks dating back to 1990 - including the Asian bank crisis, Lehman default, eurozone sovereign crisis and Covid pandemic - a 60/40 portfolio of equities and government bonds has outperformed cash 75% of the time over a one-year horizon, and always over three years. The average excess returns above cash are meaningful: 9% over one year, and more than 20% over a three-year timeframe. Thus, whatever their outlook for 2025, investors should bear in mind the historical value a diversified multi-asset portfolio has provided.
Even after shocks, staying invested tends to beat cash
%, subsequent excess total return over cash after shocks
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