Volatility Multi-Asset Chart

Staying Diversified When Turbulence Makes Cash Tempting

30 April 2025

2 min read

A Multi-Asset Strategy Has Outperformed Cash After Major Downturns

One- and Three-Year Excess Returns (40/40/20 Blend Minus Cash Proxy) During Market Recoveries (Percent)

Excess returns range from 8.6% to 53.5% during the sharpest market rebounds in the last 25 years.

Past performance does not guarantee future results.
Multi-asset strategy is represented by 40% MSCI World Equity, 40% Bloomberg Global High Yield, 20% Bloomberg Global Treasury; cash proxy is represented by Bloomberg 1–3 Month T-Bill Index. Returns for each post-downturn period are measured beginning at the lowest point of S&P 500. From left to right: October 11, 2002, March 5, 2009, August 8, 2011, March 23, 2020, October 10, 2022
Returns greater than one year are annualized.
As of March 10, 2025
Source: "Bloomberg, MSCI, S&P 500 and AllianceBernstein (AB)

A tense global trade war, policy uncertainty and other investor concerns in recent weeks have unleashed the sharpest market swings in years, with the CBOE Volatility Index (VIX) spiking to 52.3 on April 8.

When markets retreat, it’s understandable that investors can be tempted to abandon their long-term strategy for the perceived safety of short-term cash-like investments. But selling when the chips are down has its own risk—missed growth potential from the inevitable rebound across asset classes. In fact, post-correction recoveries have historically presented favorable conditions to add exposure across asset classes, according to our research.

Starting with the 2000 dot-com bust, a diversified strategy of global equities, high-yield corporate bonds and government/sovereign bonds outperformed short-term US Treasury bills after four of the biggest market downturns (Display). The contrast has been especially sharp during one-year recovery periods. For instance, the strategy returned 53.5% versus 0.1% for cash for the 12 months starting from the March 2009 market low. Most recently, its 13.7% return outpaced 4.7% for cash for the year following the 2022 sell-off—when yields on money market and cash-like accounts were historically high.

Today’s turmoil can be jarring, but markets have historically rebounded from major downturns. We believe it’s better to remain well diversified and stay put.

Moving forward, we expect reasonable economic growth, falling inflation and normalizing monetary policy to support risk assets such as equities, credit and government bonds—all key pillars of a multi-asset strategy.

The views expressed herein do not constitute research, investment advice or trade recommendations, and do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.

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The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

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