Most investors hold real estate as a home. Some invest separate in this asset class directly or indirectly via real estate investment trusts (REIT). Are these investments effective diversifiers?
Can artificial intelligence (AI) platforms based on large language models rapidly analyze interactions among economic growth, inflation and asset class returns? To investigate, we pose to Claude the following prompt:
Please construct charts with U.S. total inflation on the vertical axis and U.S. real GDP growth on the horizontal axis, with annual returns for SPY, TLT, VNQ, GLD and DBC through 2025 plotted as points within the charts.
The selected ETFs are proxies for U.S. stocks, U.S. Treasury bonds, real estate, gold and commodities, respectively. We let Claude decide on exact methodology and formatting. Using responses to the prompt as posed in late September 2026, we find that:Keep Reading
How do returns of different asset classes recently interact with inflation as measured by monthly change in the not seasonally adjusted, all-items consumer price index (CPI) from the U.S. Bureau of Labor Statistics? To investigate, we look at lead-lag relationships between change in CPI and returns for each of the following 10 exchange-traded fund (ETF) asset class proxies:
Using monthly total CPI values and monthly dividend-adjusted prices for the 10 specified ETFs during December 2007 (limited by EMB) through mid-August 2026, we find that:Keep Reading
A subscriber asked which exchange-traded fund (ETF) asset class proxies make the best safe havens for the U.S. stock market as proxied by the S&P 500 Index. To investigate, we test 16 ETFs/funds as potential safe havens:
State Street Utilities Select Sector SPDR (XLU)
iShares 20+ Year Treasury Bond (TLT)
iShares 7-10 Year Treasury Bond (IEF)
iShares 1-3 Year Treasury Bond (SHY)
State Street SPDR Bloomberg 1-3 Month T-Bill (BIL)
iShares iBoxx $ Investment Grade Corporate Bond (LQD)
iShares Core US Aggregate Bond (AGG)
iShares TIPS Bond (TIP)
Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP)
Vanguard Real Estate Index Fund (VNQ)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
Invesco DB Commodity Index Tracking Fund (DBC)
United States Oil Fund, LP (USO)
Invesco DB US Dollar Index Bullish Fund (UUP)
Grayscale Bitcoin Trust (GBTC)
We consider three ways to find safe havens for the U.S. stock market based on daily or monthly returns:
Contemporaneous return correlation with the S&P 500 Index during all market conditions at daily and monthly frequencies.
Performance during S&P 500 Index bear markets as defined by the index being below its 10-month simple moving average (SMA10) at the end of the prior month.
Performance during S&P 500 Index bear markets as defined by the index being -20%, -15% or -10% below its most recent peak at the end of the prior month.
Using daily and monthly dividend-adjusted closing prices for the above 16 funds since their respective inceptions, and contemporaneous daily and monthly levels of the S&P 500 Index since 10 months before the earliest inception, all through April 2026, we find that:Keep Reading
Homes typically represent a substantial fraction of investor wealth, often leveraged via mortgages. Are there reliable relationships between U.S. home prices and the U.S. stock market? For example, does a rising stock market stimulate home prices? Do homes diversify stocks? To investigate, we consider the following inputs:
Monthly levels of the non-seasonally adjusted S&P/Case-Shiller U.S. National Home Price Index (Home Price Index) during January 1987 through December 2025, with release lag about three months.
Annual median sales prices for existing homes during 1963 through 2025, as assembled by Claude (with guidance).
Using these sources, monthly levels of the S&P 500 Index (SP500) and yields on 3-month and 1-year U.S. Treasury bills (T-bills) for Sharpe ratio calculations during January 1963 through February 2026, we findthat:
How do returns of different asset classes recently interact with inflation as measured by monthly change in the not seasonally adjusted, all-commodities producer price index (PPI) from the U.S. Bureau of Labor Statistics? To investigate, we look at lead-lag relationships between change in PPI and returns for each of the following 10 exchange-traded fund (ETF) asset class proxies:
Using monthly total PPI values and monthly dividend-adjusted prices for the 10 specified ETFs during December 2007 (limited by EMB) through January 2026, we find that:Keep Reading
How do returns of different asset classes recently interact with the Effective Federal Funds Rate (EFFR)? We focus on monthly changes (simple differences) in EFFR and look at lead-lag relationships between change in EFFR and returns for each of the following 10 exchange-traded fund (ETF) asset class proxies:
Using end-of-month EFFR and dividend-adjusted prices for the 10 ETFs during December 2007 (limited by EMB) through July 2025, we find that:Keep Reading
Do stocks of homebuilders, whose sales are particularly sensitive to interest rate changes, reliably lead the overall stock market? To check, we look at lead-lag relationships between monthly returns for SPDR S&P Homebuilders ETF (XHB) and for SPDR S&P 500 ETF Trust (SPY). Using monthly dividend-adjusted returns for XHB and SPY during February 2006 (inception of XHB) through July 2025, we find that:Keep Reading
A subscriber asked whether behaviors of other asset classes predict those of real estate investment trusts (REIT) as proxied by Vanguard Real Estate Index Fund ETF Shares (VNQ). To investigate, we relate VNQ monthly returns to monthly returns of four exchange-traded fund (ETF) asset class proxies:
Specifically, we perform a monthly lead-lag analysis for VNQ return versus return for each of the other four ETFs, and we examine average next-month VNQ return across ranges of monthly returns for these four ETFs. Using monthly dividend-adjusted returns for VNQ, SPY, TLT, LQD and GLD from VNQ inception in September 2004 (except November 2004 for GLD) through May 2025, we find that:Keep Reading
How fast should individuals plan to grow net worth as they age? To investigate, we examine median levels of household (1) total net worth and (2) net worth excluding home equity from several vintages of U.S. Census Bureau data. We make the following head-of-household age cohort assumptions:
Do alternative investments (real estate, venture capital, private equity, hedge funds, private credit, infrastructure and energy investments) offer attractive returns and diversification, buffering investors from the vagaries of the stock market? In his March 2025 paper entitled “The Demise of Alternative Investments”, Richard Ennis examines contributions of alternative investments (alts) to pension fund and endowment portfolio net performances. He first looks at costs of investing in alts. He then relates public pension fund and university endowment portfolio alt allocations to their excess returns (relative to risk-matched simple portfolios of U.S. and non-U.S. stocks and investment-grade U.S. bonds). Using results of prior research, a sample of 50 large U.S. public pension funds for the 16 fiscal years ended June 2024 and 16 years of composite performance data for large university endowments from the National Association of College and University Business Officers, he finds that:
