Everything cannot do well all of the time - A 2020 theme

In a perfect world market returns are positive and high. In this world, asset allocation decisions do not matter so much. 2019 was an absolute return year. If you held market portfolio for equities, you did well. If you held bonds, you did well. If you held a 60/40 stock/bond blend, you generated double digit returns. Of course, you would have done better with higher equity exposure, but there are few complaints with diversification this year. 

Through November, a 60/40 stock/bond blend of the S&P500 and 10-year Treasury returns has generated a return of over 20%. The chart shows the 60/40 blend since 1928. There were better years when bond yields were higher but 2019 is a great year. It is in the top 20% percent of all years. It is the best year since 1998 and December has not been included.

However, 2020 is more likely going to be a relative value world. Everything is not going to do well, and absolute returns will likely be lower. Call it a year to have tempered expectations. Since 1928, there is slightly less than 50% chance of having a plus 20% return year followed with a double-digit return. The law of averages still applies. The allocation choices made will have a significant impact on portfolio returns and absolute returns will be lower. This is not a dire prediction just a more likely reality.