Halfway to Nowhere: 2022 Mid-Year Portfolio Rankings


Now that June has come to an end, economists are busy tabulating various indicators as usual to close the quarter. And while the numbers are not yet final, early reports indicate that the US experienced its second consecutive quarter of negative growth. Those uninitiated in technical jargon may simply shrug their shoulders, look around, and give a hearty “no crap” to the suggestion that the economy is floundering. But it’s a fairly big deal in economic circles, as that meets the classic definition of the big R-word.

Welcome to the recession.

As stocks swoon, rates rise, inflation takes off, and recession takes hold, clearly it has been a challenging year for investors. So while economists are doing their thing looking at the big picture, I thought it would be educational to run my own numbers on investing choices more within our personal control.

Would you like to know how your favorite portfolio compared against all of the others in the first half of 2022? Let’s dive in and explore what it took to do relatively well in particularly tough investing timeframe.


Portfolio Charts normally deals in annual data for lots of different countries. In order to model 6 months of returns without going crazy finding new sources, I limited the data to US markets. Beyond that one simplification, here’s how everything was calculated.

  • I used ETFreplay to find the total returns (including reinvested dividends/interest) of one representative ETF for each asset from Jan 1st through June 30th. Assuming each portfolio was perfectly balanced at the beginning of the year, I then calculated the weighted half-year return.
  • Inflation for the timeframe was calculated from CPI-U. The final June number isn’t out for another week, so I rounded up the data through May from 4.8% to 5%. That may ultimately understate the final number just a bit, but it should still be in the right ballpark. And yes, 5% inflation in just 6 months is indeed very high historically.
  • I also accounted for the expense ratios for each fund and subtracted a half year of expenses.

Put that all together, and all numbers should be pretty realistic and consistent with the methodology used for all of the other portfolio data on the site. Real funds, total returns, inflation-adjusted, and inclusive of fees. So we’re talking about real-world results rather than idealized academic models.

Rankings & Observations

With that background in mind, let’s get right to it! Here are the mid-year returns for every portfolio I track.

2022 mid-year portfolio rankings

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First, let’s get the obvious part out of the way — that’s a lot of red! 2022 has clearly not been kind to investors, and there is no escape from the pain. But while frustrated bag-holders might throw up their hands at the futility of making money during a recession, some portfolios have definitely done better than others. So take a minute to study that chart before moving on.

Got it? Excellent! Then allow me to point out a few things I find interesting.

Stocks are painful

One of the clearest patterns that emerges every time I make a drawdown chart like this is that the Total Stock Market inevitably shows up at the bottom of the list. That’s not to say that investing all of your money in stocks is a poor choice, but it’s important to understand what you’re getting yourself into. Sure, stocks often have attractive averages when you look at a long-enough timeframe. But in the short term they can be extremely volatile, and that volatility is more than just a standard deviation number on a spreadsheet. It corresponds to a deep red drawdown that truly hurts when it represents your entire life savings.

So when people talk about assuming greater risk for a higher return, don’t fixate on the theoretical return without giving the tradeoff serious consideration. Look at the 25% loss for stocks in just 6 months. That’s the risk. Are you prepared?

Commodities are effective chaos assets

On the other end of the spectrum, two portfolios stand out — the 7Twelve Portfolio and Ivy Portfolio. Beyond simply having lower percentages of stocks (they’re each around only 40%), they owe much of their better performance to one very specific asset — commodities. With 16.6% and 20%, respectively, they have the highest allocations to commodities that I’ve come across.

Commodities are notoriously fickle and volatile but in this case they came through in a huge way. In a time when basically everything lost money, would you be interested in an asset that gained 35%? Yeah, I thought so!

You may not be too familiar with commodities futures, but I imagine you’re acutely aware of the crazy gas prices right now. Once you realize that over 60% of a popular commodities ETF like GSG is invested in physical energy products like crude oil and natural gas, the resulting boom probably won’t sound so surprising. They’re pretty much tailor made for the unique current inflation in fuel prices.

Now it won’t last forever and eventually they’ll probably correct. But I imagine 7Twelve and Ivy investors are pretty happy right now and eagerly planning how to rebalance their portfolios with all of those gains to offset losses elsewhere. In times of financial stress, real assets like commodities can often carry the day when stocks and bonds struggle in unison. And in 2022 that insurance definitely paid off.

Value picked up the slack

It’s a little more subtle than the stocks on the left and commodities on the right, but if you look closely you may notice that most of the portfolios including value tilts reside on the more favorable right half of the chart. While value stocks were not immune from the downturn by any means, they did relatively better than their growth cousins. So portfolios that invested in value also did better than ones that did not.

I’m sure some value acolytes will attribute that outperformance to academic value premiums and cite the appropriate research papers, but in this case I think it’s really a lot simpler than that. On an industry level, value funds generally don’t include many tech companies that have skewed overwhelmingly growth-oriented in recent years. And tech has been absolutely pummeled this year.

So even if you’re not a big believer in the academic value premium, think a bit about the practical benefit of diversifying industries. Cap-weighted total market funds are naturally heavily weighted towards tech these days simply because those are the largest companies. In contrast, here’s how the sector breakdown of the small cap value fund VBR (Portfolio) compares to the S&P500 (Benchmark):

Image courtesy of TDAmeritrade

As you can see, the S&P500 is a lot more concentrated in a few industries like tech than you may realize. For investors interested in not putting so many eggs into one basket, the simple act of also investing in a small cap value fund is a great way to easily diversify into different sectors like industrials, financials, and real estate. So when one industry falters, you’re much less exposed to the downside.

Value investing to me isn’t just about risk premiums. It’s also about solid risk management.

You kept your bonds, right?

In the midst of all of the stock turmoil, one additional financial headwind is the new reality of rising interest rates. Of course, rising rates mean falling bond values. And investors of all types have been sounding alarm bells for a while, with even famous guys like Ray Dalio proclaiming in 2020 that you’d be crazy to hold government bonds right now. Now that rates are rapidly rising in reality and not just in theory, it has been pretty trendy to get out while you still can.

So how has that worked out for these smart, active investors seeking to avoid that very real downside? Here’s the performance of various types of stocks and bonds this year (before inflation and expenses that hit them all relatively equally):

USA: -21.3Long Term: -21.9
ex-US: -18.9Intermediate: -7.7
Emerging Markets: -14.9Short Term: -3.0

Which assets did you like and fear most before the recession started? If you were confident enough to stay the course and keep those bonds when everyone else was running to stocks, good for you! You’re measurably better off right now than all of those experts even if they called the rising rates correctly.

Add it all up, and there’s a good reason that the Larry Portfolio and Permanent Portfolio have showed pretty well this year. Even with 50-70% bonds in a rising rate environment, they both ranked in the top-4. And they can attribute that performance largely to staying the course with unpopular assets whose downside was perhaps overblown relative to realistic alternatives.

Every asset serves a purpose and has a time to shine. Sometimes we may think we know for sure that the time has passed, only to learn the hard way that even when they do struggle they can still be still better than other options. 2022 has been a revealing year in terms of asset expectations.

It’s Not Over Yet

While the last 6 months have been really tough, we’re definitely not out of the woods yet. The economy is still shrinking, inflation is still rising, and there’s no immediate sign of relief. So if market performance this year has stressed you out, unfortunately I have some bad news. It’s probably not done dropping, and historically speaking it can get a lot worse.

About two years ago I wrote an article called The Top 4 Portfolios to Recession-Proof Your Investments. Cribbing one chart from that analysis, you can see how it puts our current situation in perspective.

Not only is the year only halfway over, but we’re only about halfway to the bottom for many of these portfolios. One should not assume that it will happen this year (doubling a half-year of returns is not how this stuff works), but a responsible mindset would be to recognize that it happened before and can happen again. Plan accordingly!

And while we’re talking about the recession-proof article, the first half of this year also presents a good opportunity (regardless of whether the NBER formally declares it a recession) to revisit the analysis with the benefit of another datapoint. When I looked at this before, the four portfolios highlighted in pink stood out as particularly resilient to economic downturns in many different countries. Every recession has different root causes, however, and the current one is unique in its own way.

Compared to previous recessions, some asset allocations like the All Seasons Portfolio are doing worse (due to high long term bond allocations in a rising rate environment) and some like the Ivy Portfolio are doing better (due to a high commodities allocation with skyrocketing fuel prices). But there are also some consistent patterns with the Larry Portfolio and Permanent Portfolio fulfilling their promise yet again and the Golden Butterfly not looking too shabby, either. Some portfolios truly are more dependable than others. And if you’re worried about recession then there’s a lot you can learn from those who weather the storm time and time again.

Looking Forward

Yes, 2022 has been a painful year so far. It may even get worse before it gets better, but it will get better. So beyond the asset context and portfolio nuances, the important lesson here is not about change but about preparation. Just like stocking a pantry for an unforeseen emergency, it’s important to think beyond the average and plan for the worst. Because as long as you can wait it out without worry, you’ll be fine.

So as we all hunker down and wait for the worst to pass, try to resist the temptation to constantly “do something” with your investments and instead think about how you prepared for this moment. If your plan suddenly feels a lot less secure than you’re comfortable with, then take this as a learning opportunity and start gaming out how you can better safeguard your financial future.

Maybe that means moving towards a more resilient asset allocation. Or maybe it’s not about investing at all, but about getting a new job that pays more or reducing expenses where you can. There are actually lots of ways to attack the cash flow problem, so don’t limit yourself! And definitely don’t put investing on a pedestal without first addressing the saving issue staring you in the face.

Once you’re settled and comfortable turning your attention back to asset allocation, take some time to breathe. Recessions are no fun, and your current portfolio may not be doing too well. But even while unseen economists and loud talking heads debate the root causes of financial turmoil far beyond your sphere of influence, investing satisfaction is still within your control.

Choose the right portfolio suited for your personal needs, and investing gets so much easier. So if the first half of 2022 has got you down, make the second half the time that you fight back and get your asset allocation in order.

The desert is hot and the journey is long, but those who persevere are stronger for the effort.

Did this provide a helpful new perspective on the current economy?

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