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Real Returns on Major Asset Classes Since The Start of the Pandemic

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In the beginning of 2020, as the COVID-19 pandemic seemed likely to spread in advanced economies, financial markets entered a period of turmoil. Some even thought the world was headed for a financial crisis. But after the deployment of major fiscal and monetary policy interventions around the world, among other factors, such a crisis never materialized. In fact, financial markets performed exceptionally well by historical standards in the periods following the pandemic recession of the second quarter of 2020.

The FRED graph above plots the cumulative real returns on three major classes of assets held by U.S. households—stocks, real estate, and corporate bonds—since the last full month before the pandemic, December 2019. It’s useful to unpack this definition. First, these returns are cumulative: At each date, they measure the return obtained by someone who purchased the asset at the initial date (December 2019) and sold it at that given date. Second, these returns are real, meaning they’re adjusted for inflation.

Stocks (in blue). The graph shows that stocks, measured by the S&P 500, did not perform well in the early stages of the pandemic: The blue line falls below 1 in the first few quarters. But stocks boomed in the following periods. At its peak at the end of 2021, the real cumulative return on the S&P 500 index was around 36%. Cumulative returns have fallen since then, but were still equal to 5% as of September 2022.

Real estate (in red). Cumulative returns on housing rose steadily until May, peaking at over 27%, and had fallen slightly as of the last available observation.

Corporate bonds (in green). Finally, corporate bonds have not done so well: Their cumulative return peaked at 8% at the end of 2020, but has fallen ever since: It was –20% as of September 2022. Bond returns typically underperform in high-inflation situations.

How this graph was created: Search FRED for “S&P 500” and click “Edit Graph.” For “Units,” select “Index (Scale value to 100 for chosen date)” and set the date as 2019-12-31. Add a series, “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average,” and apply the same transformation (Index set to 100, date 2019-12-31). Modify the frequency to monthly, using “Average” as the aggregation method. In the formula field, type “a/b.” At the top, click on “Add Line” and repeat these exact steps for “S&P/Case-Shiller U.S. National Home Price Index.” Repeat one final time for “ICE BofA US Corporate Index Total Return Index Value” and set the starting date of the graph to 2019-11-30 and the final date to 2022-09-01.

Suggested by Miguel Faria-e-Castro.

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