The Last 10 Years and the Next 10

By Charlie Bilello

17 Dec 2020


These are the returns from major asset classes over the last 10 years…

Data via YCharts

What stands out?

A few things:

1) Bitcoin, with an annualized return of over 200%, is in a different stratosphere. Bitcoin was trading at just 30 cents 10 years ago. Few had ever heard of it and fewer still owned it. This week it surpassed $20,000 and now almost everyone has heard of it. Institutional investors are increasingly embracing it as a unique asset in a portfolio.

2) The tech-heavy Nasdaq 100 has trounced everything else in the global equity markets, annualizing at over 20% per year.

What’s driving that?

a) Technology’s outperformance versus the broad market (highest ratio since August 2000).

b) Growth’s outperformance of value (highest ratio since August 2000).

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3) Long-term Treasuries leading all bonds with an annualized return of over 8% per year.

The decline in interest rates over the last 10 years from 4.5% to an all-time low of less than 1% this year has been the catalyst.

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4) Cash has been trash, returning about 0.5% per year, as the Fed held short-term rates at 0% until December 2015 (starting in December 2008) and after a slight increase from the end of 2015 to the end of 2018, quickly moved them back to 0% in March of this year.

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5) Commodities have been the worst performing asset class (-6%/year) due in large part to the decline in Crude Oil which is nearly 50% lower than its price 10 years ago.

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What will the next 10 years bring?

Many more surprises.

At the end of 2010, how many would have predicted the Nasdaq 100 ($QQQ) would lead all equities with a return of 527% after declining 11.6% in the prior 10 years (Dec 2000 – Dec 2010)? Needless to say, very few.

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What might surprise people in the next 10 years?

  • A sustained rise in interest rates with higher inflation and strength in commodities.
  • US equity underperformance vs. the world.
  • Tech underperformance vs. other sectors.
  • Growth underperformance vs. value.
  • Bitcoin trading around the same levels it trades at today. (I say this because most seem to believe Bitcoin is either worthless or an asset that will continue to appreciate at the same rate as the past.)

Will any of these things happen?

No one knows with any level of certainty, which is why you diversify – to protect yourself from your inability to predict the future (see rule #19).

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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For our full disclosures, click here.

About the author

Charlie Bilello

Charlie is the founder and CEO of Compound Capital Advisors.

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