Real Assets Post Strong Performance
- Real assets have emerged as strong relative performers to the S&P 500 year-to-date.
- The S&P 500 has rebounded sharply—up 10% from its April lows—but underlying concerns about the broader economic outlook persist.
- There are concerns that recent trade wars and geopolitical uncertainty could affect foreign demand for US Treasuries.
As markets grapple with recent turbulence, real assets have emerged as strong relative performers compared to the S&P 500 year-to-date, underscoring their value in a portfolio during shifting macroeconomic regimes. Unlike equities and bonds, real assets derive part of their value from utility and scarcity, in addition to traditional market supply and demand dynamics.
Real assets are generally categorized into five main subgroups: natural resources, real estate, commodities, infrastructure, and TIPS. The chart above illustrates the price performance of these subgroups versus the S&P 500 since the beginning of this year. Apart from the “Liberation Day” market-wide selloff, real assets have fared well in what has been a bearish year for equities so far.
We continue to stress the importance of diversification as a key determinant of a well-rounded portfolio and believe real assets can play this role. Real assets offer a potential hedge against inflation volatility, generate additional yield, and act as a diversifier relative to broad equities and fixed income—all of which become even more important during periods of heightened uncertainty.