A look at major asset classes’ performance in times of crisis

There are rules of thumb as to how the individual asset classes usually behave – such as the stock market flourishing in times of economic boom, government bonds being significantly less risky investments than stocks, and gold shining the most in times of crisis. While many different factors usually converge and make it impossible to predict the performance of a particular asset class with any degree of certainty, it is absolutely possible to analyse the behaviour of financial instruments in retrospective, such as US stocks, government bonds and gold in past phases of crisis – from the 2008 financial crisis to the global coronavirus pandemic in 2020.

Six phases of crisis in the US economy since 2008

Starting with the credit crunch in the US realty sector and the financial crisis in 2008, which quickly spread across the entire world, through to the flash crash in 2010, the downgrading of the US credit rating as a result of the budget crisis in 2011, the effects of the devaluation of the Chinese currency in 2015, the US-Chinese trade war and the economic slump caused by Covid-19, the US economy experienced a total of six crisis phases up to 2020, most of which had a very negative impact on the US stock market. The S&P 500 Index plunged by more than 50 per cent in 2008, by 15 per cent in 2010 and by 19 per cent in 2015. The index lost 12 per cent of its value in both 2011 and 2015. During the pandemic in 2020, the S&P 500 actually gained slightly.

Bonds and gold have proven their claim as crisis-proof investments

During the global financial crisis, interest rates on US government bonds rose by 16 per cent, but by only 2 to 4 per cent in the other phases of crisis, with the exception of the coronavirus pandemic, when they offered 10 per cent higher returns. The gold price, however, not only gained in all six crises. It also significantly outperformed government bond yields: during the 2008 financial crisis, the gold price increased by 26 per cent, and in 2022, gold clearly outperformed US bonds with a gain of 30 per cent. 
The situation has been somewhat different in 2023 and so far in 2024: both gold and the S&P 500 afforded investors considerable gains, with the US stock market even coming out on top last year.