Markets in a Minute
Asset Class Risk and Return Over the Last Decade (2010-2019)
This Markets in a Minute Chart is available as a poster.
This Markets in a Minute Chart is available as a poster.
The Importance of Asset Classes
Asset allocation is one of the most important decisions an investor can make. In fact, studies have found that the percentage of each asset type held in a portfolio is a bigger contributor to returns than individual security selection.
However, it’s important for investors to select asset classes that align with their personal risk tolerance—which can differ based on how long they plan to hold an investment—and their targeted returns. This Markets in a Minute chart from New York Life Investments shows asset class risk and return data from 2010-2019 to highlight their different profiles.
Asset Class Risk and Return
To measure risk and return, we took annualized return and standard deviation data over the last ten years.
Annualized returns show what an investor would have earned over a timeframe if returns were compounded. It is useful because an investment’s value is dependent on the gains or losses experienced in prior time periods. For example, an investment that lost half of its value in the previous year would need to see a 100% return to break even.
Standard deviation indicates risk by measuring the amount of variation among a set of values. For example, equities have historically seen a wide range in returns, meaning they are more volatile and carry more risk. On the other hand, treasuries have typically seen a smaller range in returns, illustrating lower volatility levels.
Below is the risk and return for select asset classes from 2010-2019, organized from lowest return to highest return.
| Asset Class | Annualized Return | Annualized Standard Deviation |
|---|---|---|
| Global Commodities | -5.38% | 16.60% |
| Emerging Markets Equity | -0.89% | 16.95% |
| Treasury Coupons | 0.73% | 0.81% |
| Investment Grade Bonds | 3.17% | 2.92% |
| Hedge Funds | 4.05% | 5.70% |
| Corporate Bonds | 5.55% | 5.26% |
| Global Listed Private Equity | 5.59% | 18.63% |
| 1-5yr High Yield Bonds | 6.71% | 1.00% |
| Global Equity | 6.75% | 12.50% |
| Global Equity - ESG Leaders | 6.87% | 12.03% |
| Taxable Municipal Bonds | 7.20% | 7.33% |
| Real Estate Investment Trusts | 8.44% | 11.03% |
| U.S. Mid Cap Equity | 11.00% | 13.60% |
| U.S. Large Cap Equity | 11.22% | 11.39% |
| Dividend-Paying Equity | 11.81% | 10.24% |
| U.S. Small Cap Equity | 11.87% | 14.46% |
Note: See the bottom of the graphic for the specific indexes used.
Global commodities saw the lowest return over the last 10 years. Plummeting oil prices, and an equities bull market that left little demand for safe haven assets like precious metals, likely contributed to the asset class’ underperformance.
Backed by the U.S. federal government, Treasury coupons had the lowest volatility but also saw a relatively low return of 0.73%. In contrast, 1-5 year high yield bonds generated a return of 6.71% with only slightly more risk.
With the exception of emerging market equity, all selected equities had higher risk and relatively higher historical returns. Among the stocks shown, dividend-paying equity saw the highest returns relative to their risk level.
Building a Portfolio
As they consider asset class risk and return, investors should remember that historical performance does not indicate future results. In addition, the above data is somewhat limited in that it only shows performance during the recent bull market—and returns can vary in different stages of the market cycle. For example, commodities go through multi-decade periods of price ascent and decline known as super cycles.
However, historical information may help investors gauge the asset classes that are best suited to their personal goals. Whether an investor needs more stability to help save for a near-term vacation, or investments with higher return potential for retirement savings, they can build a portfolio tailored to their needs.
Markets in a Minute
Mapped: GDP Growth Forecasts by Country, in 2023
The global economy faces an uncertain future in 2023. This year, GDP growth is projected to be 2.9%—down from 3.2% in 2022.
Mapped: GDP Growth Forecasts by Country, in 2023
Since Russia’s invasion of Ukraine early last year, talk of global recession has dominated the outlook for 2023.
High inflation, spurred by rising energy costs, has tested GDP growth. Tightening monetary policy in the U.S., with interest rates jumping from roughly 0% to over 4% in 2022, has historically preceded a downturn about one to two years later.
For European economies, energy prices are critical. The good news is that prices have fallen recently since March highs, but the continent remains on shaky ground.
The map shows GDP growth forecasts by country for the year ahead, based on projections from the International Monetary Fund (IMF) October 2022 Outlook and January 2023 update.
2023 GDP Growth Outlook
The world economy is projected to see just 2.9% GDP growth in 2023, down from 3.2% projected for 2022.
This is a 0.2% increase since the October 2022 Outlook thanks in part to China’s reopening, higher global demand, and slowing inflation projected across certain countries in the year ahead.
With this in mind, we show GDP growth forecasts for 191 jurisdictions given multiple economic headwinds—and a few emerging bright spots in 2023.
| Country / Region | 2023 Real GDP % Change (Projected) | 2022 Real GDP % Change (Projected) |
|---|---|---|
| 🇦🇱 Albania | 2.5% | 4.0% |
| 🇩🇿 Algeria | 2.6% | 4.7% |
| 🇦🇴 Angola | 3.4% | 2.9% |
| 🇦🇬 Antigua and Barbuda | 5.6% | 6.0% |
| 🇦🇷 Argentina* | 2.0% | 4.0% |
| 🇦🇲 Armenia | 3.5% | 7.0% |
| 🇦🇼 Aruba | 2.0% | 4.0% |
| 🇦🇺 Australia* | 1.6% | 3.8% |
| 🇦🇹 Austria | 1.0% | 4.7% |
| 🇦🇿 Azerbaijan | 2.5% | 3.7% |
| 🇧🇭 Bahrain | 3.0% | 3.4% |
| 🇧🇩 Bangladesh | 6.0% | 7.2% |
| 🇧🇧 Barbados | 5.0% | 10.5% |
| 🇧🇾 Belarus | 0.2% | -7.0% |
| 🇧🇪 Belgium | 0.4% | 2.4% |
| 🇧🇿 Belize | 2.0% | 3.5% |
| 🇧🇯 Benin | 6.2% | 5.7% |
| 🇧🇹 Bhutan | 4.3% | 4.0% |
| 🇧🇴 Bolivia | 3.2% | 3.8% |
| 🇧🇦 Bosnia and Herzegovina | 2.0% | 2.4% |
| 🇧🇼 Botswana | 4.0% | 4.1% |
| 🇧🇷 Brazil* | 1.2% | 2.8% |
| 🇧🇳 Brunei Darussalam | 3.3% | 1.2% |
| 🇧🇬 Bulgaria | 3.0% | 2.9% |
| 🇧🇫 Burkina Faso | 4.8% | 3.6% |
| 🇧🇮 Burundi | 4.1% | 3.3% |
| 🇨🇻 Cabo Verde | 4.8% | 4.0% |
| 🇨🇲 Cameroon | 4.6% | 3.8% |
| 🇰🇭 Cambodia | 6.2% | 5.1% |
| 🇨🇦 Canada* | 1.5% | 3.3% |
| 🇨🇫 Central African Republic | 3.0% | 1.5% |
| 🇹🇩 Chad | 3.4% | 3.3% |
| 🇨🇱 Chile | -1.0% | 2.0% |
| 🇨🇳 China* | 5.3% | 3.2% |
| 🇨🇴 Colombia | 2.2% | 7.6% |
| 🇰🇲 Comoros | 3.4% | 3.0% |
| 🇨🇷 Costa Rica | 2.9% | 3.8% |
| 🇨🇮 Côte d'Ivoire | 6.5% | 5.5% |
| 🇭🇷 Croatia | 3.5% | 5.9% |
| 🇨🇾 Cyprus | 2.5% | 3.5% |
| 🇨🇿 Czech Republic | 1.5% | 1.9% |
| 🇨🇩 Democratic Republic of the Congo | 6.7% | 6.1% |
| 🇩🇰 Denmark | 0.6% | 2.6% |
| 🇩🇯 Djibouti | 5.0% | 3.6% |
| 🇩🇲 Dominica | 4.9% | 6.0% |
| 🇩🇴 Dominican Republic | 4.5% | 5.3% |
| 🇪🇨 Ecuador | 2.7% | 2.9% |
| 🇪🇬 Egypt* | 4.0% | 6.6% |
| 🇸🇻 El Salvador | 1.7% | 2.6% |
| 🇬🇶 Equatorial Guinea | -3.1% | 5.8% |
| 🇪🇷 Eritrea | 2.9% | 2.6% |
| 🇪🇪 Estonia | 1.8% | 1.0% |
| 🇸🇿 Eswatini | 1.8% | 2.4% |
| 🇪🇹 Ethiopia | 5.3% | 3.8% |
| 🇫🇯 Fiji | 6.9% | 12.5% |
| 🇫🇮 Finland | 0.5% | 2.1% |
| 🇫🇷 France* | 0.7% | 2.5% |
| 🇲🇰 North Macedonia | 3.0% | |
| 🇬🇦 Gabon | 3.7% | 2.7% |
| 🇬🇪 Georgia | 4.0% | 9.0% |
| 🇩🇪 Germany* | 0.1% | 1.5% |
| 🇬🇭 Ghana | 2.8% | 3.6% |
| 🇬🇷 Greece | 1.8% | 5.2% |
| 🇬🇩 Grenada | 3.6% | 3.6% |
| 🇬🇹 Guatemala | 3.2% | 3.4% |
| 🇬🇳 Guinea | 5.1% | 4.6% |
| 🇬🇼 Guinea-Bissau | 4.5% | 3.8% |
| 🇬🇾 Guyana | 25.2% | 57.8% |
| 🇭🇹 Haiti | 0.5% | -1.2% |
| 🇭🇳 Honduras | 3.5% | 3.4% |
| 🇭🇰 Hong Kong SAR | 3.9% | -0.8% |
| 🇭🇺 Hungary | 1.8% | 5.7% |
| 🇮🇸 Iceland | 2.9% | 5.1% |
| 🇮🇳 India* | 6.1% | 6.8% |
| 🇮🇩 Indonesia* | 4.8% | 5.3% |
| 🇮🇶 Iraq | 4.0% | 9.3% |
| 🇮🇪 Ireland | 4.0% | 9.0% |
| 🇮🇷 Iran* | 2.0% | 3.0% |
| 🇮🇱 Israel | 3.0% | 6.1% |
| 🇮🇹 Italy* | 0.6% | 3.2% |
| 🇯🇲 Jamaica | 3.0% | 2.8% |
| 🇯🇵 Japan* | 1.8% | 1.7% |
| 🇯🇴 Jordan | 2.7% | 2.4% |
| 🇰🇿 Kazakhstan* | 4.3% | 2.5% |
| 🇰🇪 Kenya | 5.1% | 5.3% |
| 🇰🇮 Kiribati | 2.4% | 1.0% |
| 🇰🇷 South Korea* | 1.7% | 2.6% |
| 🇽🇰 Kosovo | 3.5% | 2.7% |
| 🇰🇼 Kuwait | 2.6% | 8.7% |
| 🇰🇬 Kyrgyz Republic | 3.2% | 3.8% |
| 🇱🇦 Lao P.D.R. | 3.1% | 2.2% |
| 🇱🇻 Latvia | 1.6% | 2.5% |
| 🇱🇸 Lesotho | 1.6% | 2.1% |
| 🇱🇷 Liberia | 4.2% | 3.7% |
| 🇱🇾 Libya | 17.9% | -18.4% |
| 🇱🇹 Lithuania | 1.1% | 1.8% |
| 🇱🇺 Luxembourg | 1.1% | 1.6% |
| 🇲🇴 Macao SAR | 56.7% | -22.4% |
| 🇲🇬 Madagascar | 5.2% | 4.2% |
| 🇲🇼 Malawi | 2.5% | 0.9% |
| 🇲🇾 Malaysia* | 4.4% | 5.4% |
| 🇲🇻 Maldives | 6.1% | 8.7% |
| 🇲🇱 Mali | 5.3% | 2.5% |
| 🇲🇹 Malta | 3.3% | 6.2% |
| 🇲🇭 Marshall Islands | 3.2% | 1.5% |
| 🇲🇷 Mauritania | 4.8% | 4.0% |
| 🇲🇺 Mauritius | 5.4% | 6.1% |
| 🇲🇽 Mexico* | 1.7% | 2.1% |
| 🇫🇲 Micronesia | 2.9% | -0.6% |
| 🇲🇩 Moldova | 2.3% | 0.0% |
| 🇲🇳 Mongolia | 5.0% | 2.5% |
| 🇲🇪 Montenegro | 2.5% | 7.2% |
| 🇲🇦 Morocco | 3.1% | 08% |
| 🇲🇿 Mozambique | 4.9% | 3.7% |
| 🇲🇲 Myanmar | 3.3% | 2.0% |
| 🇳🇦 Namibia | 3.2% | 3.0% |
| 🇳🇷 Nauru | 2.0% | 0.9% |
| 🇳🇵 Nepal | 5.0% | 4.2% |
| 🇳🇱 Netherlands* | 0.6% | 4.5% |
| 🇳🇿 New Zealand | 1.9% | 2.3% |
| 🇳🇮 Nicaragua | 3.0% | 4.0% |
| 🇳🇪 Niger | 7.3% | 6.7% |
| 🇳🇬 Nigeria* | 3.2% | 3.2% |
| 🇳🇴 Norway | 2.6% | 3.6% |
| 🇴🇲 Oman | 4.1% | 4.4% |
| 🇵🇰 Pakistan* | 2.0% | 6.0% |
| 🇵🇼 Palau | 12.3% | -2.8% |
| 🇵🇦 Panama | 4.0% | 7.5% |
| 🇵🇬 Papua New Guinea | 5.1% | 3.8% |
| 🇵🇾 Paraguay | 4.3% | 0.2% |
| 🇵🇪 Peru | 2.6% | 2.7% |
| 🇵🇭 Philippines* | 5.0% | 6.5% |
| 🇵🇱 Poland* | 0.3% | 3.8% |
| 🇵🇹 Portugal | 0.7% | 6.2% |
| 🇵🇷 Puerto Rico | 0.4% | 4.8% |
| 🇶🇦 Qatar | 2.4% | 3.4% |
| 🇨🇬 Republic of Congo | 4.6% | 4.3% |
| 🇷🇴 Romania | 3.1% | 4.8% |
| 🇷🇺 Russia* | 0.3% | -3.4% |
| 🇷🇼 Rwanda | 6.7% | 6.0% |
| 🇼🇸 Samoa | 4.0% | -5.0% |
| 🇸🇲 San Marino | 0.8% | 3.1% |
| 🇸🇹 São Tomé and Príncipe | 2.6% | 1.4% |
| 🇸🇦 Saudi Arabia* | 2.6% | 7.6% |
| 🇸🇳 Senegal | 8.1% | 4.7% |
| 🇷🇸 Serbia | 2.7% | 3.5% |
| 🇸🇨 Seychelles | 5.2% | 10.9% |
| 🇸🇱 Sierra Leone | 3.3% | 2.4% |
| 🇸🇬 Singapore | 2.3% | 3.0% |
| 🇸🇰 Slovak Republic | 1.5% | 1.8% |
| 🇸🇮 Slovenia | 1.7% | 5.7% |
| 🇸🇧 Solomon Islands | 2.6% | -4.5% |
| 🇸🇴 Somalia | 3.1% | 1.9% |
| 🇿🇦 South Africa* | 1.2% | 2.1% |
| 🇸🇸 South Sudan | 5.6% | 6.5% |
| 🇪🇸 Spain* | 1.1% | 4.3% |
| 🇱🇰 Sri Lanka | -3.0% | -8.7% |
| 🇰🇳 St. Kitts and Nevis | 4.8% | 9.8% |
| 🇱🇨 St. Lucia | 5.8% | 9.1% |
| 🇻🇨 St. Vincent and the Grenadines | 6.0% | 5.0% |
| 🇸🇩 Sudan | 2.6% | -0.3% |
| 🇸🇷 Suriname | 2.3% | 1.3% |
| 🇸🇪 Sweden | -0.1% | 2.6% |
| 🇨🇭 Switzerland | 0.8% | 2.2% |
| 🇹🇼 Taiwan | 2.8% | 3.3% |
| 🇹🇯 Tajikistan | 4.0% | 5.5% |
| 🇹🇿 Tanzania | 5.2% | 4.5% |
| 🇹🇭 Thailand* | 3.7% | 2.8% |
| 🇧🇸 The Bahamas | 4.1% | 8.0% |
| 🇬🇲 The Gambia | 6.0% | 5.0% |
| 🇹🇱 Timor-Leste | 4.2% | 3.3% |
| 🇹🇬 Togo | 6.2% | 5.4% |
| 🇹🇴 Tonga | 2.9% | -2.0% |
| 🇹🇹 Trinidad and Tobago | 3.5% | 4.0% |
| 🇹🇳 Tunisia | 1.6% | 2.2% |
| 🇹🇷 Turkey* | 3.0% | 5.0% |
| 🇹🇲 Turkmenistan | 2.3% | 1.2% |
| 🇹🇻 Tuvalu | 3.5% | 3.0% |
| 🇺🇬 Uganda | 5.9% | 4.4% |
| 🇺🇦 Ukraine | N/A | -35.0% |
| 🇦🇪 United Arab Emirates | 4.2% | 5.1% |
| 🇬🇧 United Kingdom* | -0.6% | 3.6% |
| 🇺🇲 U.S.* | 1.4% | 1.6% |
| 🇺🇾 Uruguay | 3.6% | 5.3% |
| 🇺🇿 Uzbekistan | 4.7% | 5.2% |
| 🇻🇺 Vanuatu | 3.1% | 1.7% |
| 🇻🇪 Venezuela | 6.5% | 6.0% |
| 🇻🇳 Vietnam | 6.2% | 7.0% |
| West Bank and Gaza | 3.5% | 4.0% |
| 🇾🇪 Yemen | 3.3% | 2.0% |
| 🇿🇲 Zambia | 4.0% | 2.9% |
| 🇿🇼 Zimbabwe | 2.8% | 3.0% |
*Reflect updated figures from the January 2023 IMF Update.
The U.S. is forecast to see 1.4% GDP growth in 2023, up from 1.0% seen in the last October projection.
Still, signs of economic weakness can be seen in the growing wave of tech layoffs, foreshadowed as a white-collar or ‘Patagonia-vest’ recession. Last year, 88,000 tech jobs were cut and this trend has continued into 2023. Major financial firms have also followed suit. Still, unemployment remains fairly steadfast, at 3.5% as of December 2022. Going forward, concerns remain around inflation and the path of interest rate hikes, though both show signs of slowing.
Across Europe, the average projected GDP growth rate is 0.7% for 2023, a sharp decline from the 2.1% forecast for last year.
Both Germany and Italy are forecast to see slight growth, at 0.1% and 0.6%, respectively. Growth forecasts were revised upwards since the IMF’s October release. However, an ongoing energy crisis exposes the manufacturing sector to vulnerabilities, with potential spillover effects to consumers and businesses, and overall Euro Area growth.
China remains an open question. In 2023, growth is predicted to rise 5.2%, higher than many large economies. While its real estate sector has shown signs of weakness, the recent opening on January 8th, following 1,016 days of zero-Covid policy, could boost demand and economic activity.
A Long Way to Go
The IMF has stated that 2023 will feel like a recession for much of the global economy. But whether it is headed for a recovery or a sharper decline remains unknown.
Today, two factors propping up the global economy are lower-than-expected energy prices and resilient private sector balance sheets. European natural gas prices have sunk to levels seen before the war in Ukraine. During the height of energy shocks, firms showed a notable ability to withstand astronomical energy prices squeezing their finances. They are also sitting on significant cash reserves.
On the other hand, inflation is far from over. To counter this effect, many central banks will have to use measures to rein in prices. This may in turn have a dampening effect on economic growth and financial markets, with unknown consequences.
As economic data continues to be released over the year, there may be a divergence between consumer sentiment and whether things are actually changing in the economy. Where the economy is heading in 2023 will be anyone’s guess.
Markets in a Minute
Chart: The State of U.S. Retirement Assets in 2022
U.S. retirement assets have faced challenging conditions amid market headwinds—but over the last decade these assets have nearly doubled.
This infographic is available as a poster.
Chart: The State of U.S. Retirement Assets in 2022
Today, many people are questioning the effects of high inflation on their retirement assets.
This Markets in a Minute from New York Life Investments charts the state of U.S. retirement assets to show how Americans are building their retirement savings, and where these assets are being drawn from.
U.S. Retirement Assets: Where it Stands Today
As of 2022, there was over $33 trillion being held in U.S. retirement assets.
For perspective, that’s about 31% of all household financial assets in America and nearly double the amount seen a decade ago. In the table below, we show how this breaks down by retirement asset type, using data from the Investment Company Institute:
| Type of Retirement Asset | 2022* | 2012 | 2002 | 1992 | 1982 |
|---|---|---|---|---|---|
| IRAs | $11.7T | $5.8T | $2.5T | $872B | $67B |
| DC Plans | $9.3T | $5.2T | $2.6T | $1.1T | $264B |
| State and Local Government DB Plans | $5.1T | $3.2T | $2.1T | $958B | $260B |
| Private-Sector DB Plans | $3.2T | $2.7T | $1.7T | $1.1T | $479B |
| Federal DB Plans | $2.2T | $1.3T | $800B | $411B | $99B |
| Annuities | $2.2T | $1.7T | $899B | $473B | $180B |
| Total | $33.7T | $19.9T | $10.5T | $5.0T | $1.3T |
*As of Q2 2022.
As seen above, individual retirement accounts (IRAs) hold the most retirement assets, at 34% of the total. Since 2012, they have doubled, jumping from $5.8 trillion to $11.7 trillion in 2022.
Today, about 37% of Americans hold an IRA.
With $9.3 trillion in assets, defined contribution (DC) plans are the second-greatest source of savings. These type of plans have the employee make contributions that are automatically deducted from their paycheck. Here, employers have the option to make contributions. Like IRAs, they have grown considerably in the last 10 years.
Defined benefit (DB) plans, meanwhile, have declined in usage, especially in the private sector. In 1982, private-sector DB plans made up almost 40% of U.S. retirement assets. In 2022, they accounted for under 10% of these assets.
Overall, retirement assets have declined in 2022 due to weak market performance—after a record year in 2021 driven by higher contributions, a strong market, and other factors.
U.S. Financial Security in 2022
With these factors at play, how are Americans feeling about their financial security, and how is this impacting their retirement outlook?
In one Ipsos survey, just 56% of Americans surveyed said they felt good about their overall level of financial security.
When it comes to their long-term outlook, chief among concerns is inflation. Over half surveyed said that it will likely have a big impact on their ability to save for retirement and meet other long-term financial goals. Rising interest rates and medical costs are other areas of concern, with about one-third saying they will have a large impact on achieving these outcomes.
Meanwhile, 59% of Americans said they feel confident they have enough savings to enjoy a comfortable retirement. Of these, Baby Boomers feel most confident at 70%, while Gen Z (48%) feels least confident.
The good news is that inflation looks to have hit its peak in the summer of 2022. Still, reaching a 2-3% target may take a longer period of time. With this in mind, looking to investment strategies that include floating-rate bonds and real estate, infrastructure, and value equities may help insulate retirement assets from market fluctations and inflation.
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