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Key Takeaways
- Commodities have led asset class returns this year with a 60% gain through October, driven by a whopping 144% surge in crude oil prices due to the conflict with Iran.
- One key commodity is the worst performer: Gold is down 10%, mainly due to a 7% strengthening of the U.S. dollar. This follows a 64% return in 2025.
- U.S. stocks, previously dominant, now deliver mid-tier performance, up 11.8% in 2026 through October, and U.S. bonds have lost 0.4%, highlighting the value of broader diversification.
- Portfolios diversified beyond U.S. stocks and bonds, especially with alternatives like commodities, have outperformed concentrated portfolios.
- The S&P 500 has plateaued at 7,600 for the past five months, which is possibly an inflection point leading to the next correction.
Asset Classes
Commodities have dominated performance year to date, with a 60.5% return propelled by crude oil prices that skyrocketed 144% amid conflict and shipping disruptions in the Strait of Hormuz. At the low end of the commodity spectrum, gold is down 10.2%, pressured by a 7% appreciation in the U.S. dollar.
Unlike the previous 17 years, when U.S. stocks were the best-performing asset class, today they are in the middle of the pack with an 11.8% return. At the same time, U.S. bonds have lost 0.4%. Consequently, diversification beyond U.S. stocks and bonds has added value this year, as shown in the next section.
Portfolios: Target-Date Funds
Holding more in your portfolio beyond U.S. securities has benefited performance. Most target-date funds (TDFs) are concentrated in U.S. stocks and bonds that comprise more than 90% of underlying assets. By contrast, the non-industry accounts in the exhibit above are broadly diversified into alternatives like commodities.
Evaluating Portfolio Performance
Use the target-date fund results above to evaluate your returns. Choose your horizon (target date), risk preference, and diversification (concentrated in U.S. holdings or diversified) — that’s your benchmark. How did you do?
Inflection Point
U.S. stocks are currently very expensive on a variety of bases — including the Buffett barometer — buoyed up by artificial intelligence. Corrections have followed previous occurrences of expensiveness. Some investors — such as Jeremy Grantham — expect the next correction to be the worst. I think they’ll be right.
The recent behavior of U.S. stock prices is signaling an inflection point — stocks will break either up or down. The S&P 500 has plateaued for the past five months. It’s been a directionless market where investors are uncertain. Can AI stocks continue to drive up stock prices? How high is too high?
What will protect portfolios when U.S. stocks tank, especially when inflation is also a concern? I think real assets like commodities and real estate (especially farmland) will hold up, as will Treasury Inflation-Protected Securities (TIPS).
Conclusion
The U.S. stock market has gone up every year since 2008, except 2022. That’s 17 years — the longest bull market ever recorded. Stein’s Law says this will end: “If something cannot go on forever, it will stop.”
Will the correction happen soon? No one knows, but it's a good idea to be prepared.
More articles by Ron Surz:
Ron Surz is president of Target Date Solutions, developer of the patented Safe Landing Glide Path and Soteria personalized target date accounts. He is also co-host of the Baby Boomer Investing Show. Surz’s passion is helping his fellow baby boomers at this critical time in their lives when they are relying on their lifetime savings to support a retirement with dignity, so he wrote a book, “Baby Boomer Investing in the Perilous 2020s,” and he provides a financial educational curriculum.
For anyone who relies on TDFs — or advises those who do — Surz’s new book is a must-read guide to understanding the risks, solutions, and future of a secure retirement.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
