The last three years of financial markets have been chaotic.

Uncertainty and a lack of predictability ruled the day.

It highlighted the difficulty of investing and humbled investors across different asset classes.

There is a tendency in the investment game to always look forward.

People don’t like to look back, evaluate what went right or wrong, or dissect which decisions were erroneous.

I spent a few hours this morning doing exactly this though — I wanted to see which assets performed best over the last three years. Were the public narratives correct?

What were the hidden gems?

Which strategies were completely off-base?

Here is what I found…

First, the methodology that I used was to start the analysis from January 1, 2020 till today. You can always pick a random timeline to fit within a narrative, but I felt this was the best start date to highlight the pre-pandemic prices of various assets.

We can start with the major US stock indexes.

The S&P 500 is up approximately 24% and the Nasdaq 100 is up 38.5% in the almost 38 month period. If we look internationally, the MSCI Emerging Markets Index is down nearly 13%. If we remove the emerging markets and look at the MSCI World Index, it has appreciated nearly 15% in the same time frame.

The conclusion of the basic equity indexes is that we had long periods of appreciation and drawdowns over the three years, but developed nations out performed emerging markets and the US outperformed the world. Many of these indexes, including the S&P 500 and the Nasdaq 100, performed generally in-line with their historical annual return profile.

In the bond markets, we see the S&P 500 Bond Index is down 6% since Jan 1, 2020. The Vanguard Total Bond Market Index is down about 18%. The S&P Global Developed Sovereign Bond Index is also down around 10%.

It doesn’t take a rocket scientist to understand that the bond market has been obliterated in the last 12 months and the total return on these assets for the 3-year period is negative.

The real estate market generally has not done much better. The Dow Jones U.S. Real Estate Index is down 8% since the start of 2020 and the Green Street Commercial Property Price Index is essentially flat during the same time period. We can also look at the MSCI World Real Estate Index, which consists of various equities in the real estate sector globally, and see that the three year performance is under 1% appreciation as well.

These broad-based indexes don’t tell the full real estate story though. For example, Miami real estate is up over 50% since January 2020.

On the other hand, San Francisco median sale price is down about 7%. Geography mattered over the last three years for real estate, especially when you account domestically for the dramatic moves from California and New York to Florida and Texas.

The conclusion on real estate is that it didn’t actually perform nearly as well as you would have expected during a high-inflation environment. The big run up in prices has essentially been given back in many markets due to the aggressive monetary tightening from the Federal Reserve.

But let’s push further into this analysis…

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Next, we can take a look at various commodities. The S&P Global Oil Index is up just over 4% in the last three years. The S&P GSCI Wheat Index is up about 35% and the S&P GSCI Natural Gas Index is up about 14%. The SPDR Gold Trust has appreciated 16.5% and the S&P GSCI Silver Index is up 18%.

If you pay attention to the news, it has been obvious for awhile that commodities were quite volatile. Even though oil’s financial return has not been attractive, natural gas, wheat, gold, and silver have held up decently well. It is worth calling out that the S&P 500 and Nasdaq 100 outperformed all of these during the same timeframe.

Lastly, we can look at the cryptocurrency industry.

Bitcoin has appreciated approximately 220% and Ether is up over 1,100% since January 1, 2020.

There are plenty of long-tail crypto assets that may have done better or worse than Bitcoin or Ether, but these two large cap crypto assets are the only two seriously considered a true investment opportunity by the asset managers I speak to daily.

These two assets have drastically outperformed anything else in the market and the data shows Ether was the king of the pandemic era from a financial return perspective.

Many people in the bitcoin community will get mad that I am even acknowledging Ethereum’s out-performance of Bitcoin over the last three years, but as many of you know who read this letter daily, I want to find the truth.

I want to understand the data, not the opinions.

If people get mad, so be it. I just want to understand without allowing emotion or social pressure clouding my analysis.

Obviously none of this analysis is financial advice, nor does past history indicate future performance.

Each of these trends could reverse tomorrow.

The best performing assets could be the worst performers over the next 3 years and vice-versa.

Financial markets have trillions of dollars waged every day to express the views of individuals and organizations.

Many of the assets that I’ve analyzed today experienced significant volatility over the 38 month period.

Some of them ran up hundreds of percent to only see those gains erased months later.

Investing is incredibly hard.

Markets are complex.

Humans are bad decision-makers and even worse predictors of the future.

One of the most difficult problems in finance is how to compound capital year-after-year in the best risk-adjusted basis.

Everyone knows the problem exists. Everyone is trying to solve it. But there are very few who can figure it out.

Yogesh Rao