Patchwork Chart of Investment Returns
Chart of the Week for January 27-February 2, 2006
The chart of investment returns above—and the patchwork table below—rank key indices, representing asset classes, in order of performance (high to low) each year. With it, we can make several observations about the markets:
- International markets, represented by the MSCI EAFE Index, were the top performers in 2004 and 2005 buoyed by strong performance in European markets and Japan, as well as the weak dollar.
- Large-cap stocks, represented by the Russell 1000 Index, were at the top of the chart in 1998, and the three preceding years. After the technology bubble burst in March of 2000, their performance suffered. This was the first time investors saw consecutive declines in large-caps since the 1929-1932 period. In 2003, large-cap stocks turned the corner and have performed positively since.
- Small-cap stocks, represented by the Russell 2000 Index, and mid-cap stocks, represented by the Russell Mid-Cap Index, outperformed large cap stocks for five years, beginning in 2000.
- The bond market, represented by the Lehman Brothers Aggregate Bond Index, was the leading asset class from 2000 to 2002. The performance of the Index during this period is in part attributable to record low interest rates in the United States. In addition, the rapid market decline after the technology bubble burst made many feel as if the investing environment was uncertain, at best. Fixed income instruments served as a haven for such investors.
Above all, this chart illustrates the risk inherent in capital markets and strongly supports the case for diversification. Performance of asset classes is cyclical and rankings change every year.
| Rank | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 |
|---|---|---|---|---|---|---|---|---|
| 1 | 27.0% | 27.3% | 11.6% | 8.4% | 10.3% | 47.3% | 20.7% | 14.0% |
| 2 | 20.3% | 21.3% | 8.2% | 3.8% | 1.6% | 40.1% | 20.2% | 12.7% |
| 3 | 10.1% | 20.9% | 5.9% | 2.5% | -15.7% | 39.2% | 18.3% | 6.3% |
| 4 | 8.7% | 18.2% | -3.0% | -5.6% | -16.2% | 29.9% | 11.4% | 4.6% |
| 5 | 4.9% | 4.7% | -7.8% | -12.5% | -20.5% | 4.1% | 4.3% | 3.0% |
| 6 | -2.5% | -0.8% | -14.0% | -21.2% | -21.7% | 1.0% | 1.2% | 2.4% |
| Russell 1000 | Russell MidCap | Russell 2000 | MSCI EAFE | LB Aggregate Bond | U.S. 30 Day TBill |
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing. Investment information can change rapidly and the changes can be significant particularly in volatile markets. For this reason “as of”’ dates are provided for specific data where applicable. The information should not be considered current after the dates provided.
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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.