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The Callan Periodic Table Turns 20

Callan recently published its 20th Anniversary Edition of The Callan Periodic Table of Investment Returns. This chart has become ubiquitous as an illustration for the case for diversification and is widely used in marketing, particularly with individuals. The chart shows annual returns for an array of major asset classes, ranked from best performing for the year to worst performing. It was created by Jay Kloepfer, Executive Vice President and Director of Capital Markets Research at Callan Associates.

Every picture tells a story

The Callan Periodic Table communicates the risk of concentrating in one asset class and makes the case for diversification. “The enduring appeal of the table is its ability to be understood at a glance,” says Kloepfer. “And once you’ve seen and absorbed it, you can refer to it again and again. New insights still come to me even 20 years later!” As you look across the years and asset classes, which are color coded, it’s easy to see that the top performer one year typically reverts to the mean and is often one of the lower performing within a year or two. This holds true across asset classes, capitalizations and geography. Also clear is the wide range in absolute terms of what top and bottom performance means from year to year, with top returns ranging from 78.51% in 2009 (Emerging Market Equity) to 1.38% in 2015 (Large Cap Equity). Also compelling on the downside is the fact that the worst returns range from +4.33% in 2006 (U.S. Fixed Income) to -53.33% in 2008 (Emerging Markets Equity; note in both 2007 and 2009 it was the top performer).

Cash was king in 2018

Returns in 2018 were notable for a few reasons:

○ For the first time in the history of the table, Cash Equivalents was the best-performing asset class, returning 1.87%
○ This means, given the forecasted inflation rate range for 2018, investors essentially kept up with the cost of living
○ Except for U.S. Fixed Income, which had a return of 0.01%, essentially flat for the year, all other indices tracked in the chart had negative returns, which is the first time this has happened in the 20-year history of the chart

Given the potential for continued volatility in 2019, we anticipate the Callan Periodic Table will be a particularly useful and widely-used tool for advisors this year.