During periods of heightened market volatility, investors often turn risk-averse and are tempted to make short-term allocation shifts away from equity markets. But over the long run, how have equities performed compared to 'safe havens' like cash?
Recently, equity market volatility has increased due to heightened uncertainty around fiscal, monetary, and trade policy. During such periods, investors often become risk averse and are tempted to make short-term asset allocation decisions. However, we believe individuals may be better served by taking the long view during times of market volatility.
- While it may be tempting to turn to “safe havens” such as cash or Treasury Bills in times of volatility, history shows that the probability of equities underperforming these assets decreases significantly over longer holding periods. Although past performance is not indicative of future returns, data over the past half century shows that equities have outperformed Treasury Bills 66% of the time over rolling quarters, 73% of the time over one-year periods, 90% of the time over 10-year periods, and 100% of the time over 20-year periods.
- To illustrate the power of patience, consider the worst 20-year rolling return for the S&P 500. Even from the peak of the internet bubble in March 2000 to the COVID-19 pandemic lows in March 2020—the S&P 500 still generated an annualized return of +4.8%. Moreover, this return actually outperformed the Bloomberg U.S. Aggregate Bond Index’s worst rolling 20-year annualized return by over 200 basis points.
- We believe adopting a long-term view may encourage investors to ride out the inevitable volatility of the equity market. While market drawdowns can be difficult to endure, our work supports the adage: it’s time in the market, not timing the market.
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of March 2025. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
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The Bloomberg U.S. Aggregate Bond Index is a broad benchmark that measures the performance of the U.S. investment-grade bond market, including government securities, corporate bonds, mortgage-backed securities, and asset-backed securities. The ICE BofA US Treasury 1-3 Year Index tracks the performance of short-term U.S. Treasury securities with maturities ranging from one to three years. The S&P 500 Index is an index of large company stocks considered to be representative of the U.S. stock market. The S&P indexes are a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Fred Alger Management, LLC and its affiliates. Copyright 2025 S&P Dow Jones Indices LLC, a subsidiary of S&P Global Inc. and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
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