Worst quarter in recent times puts capital stability to the acid test

Much will be written in coming days on the impact of recent extreme volatility on the September quarter. Can any asset class withstand such an onslaught? An earlier Livewire featured footage from a Sky Business ‘Your Money Your Call’ discussion between Mark Todd, Don Stammer and Richard Murphy on the 15 year Total Returns from equities, hybrids & corporate bonds. More recent Total Returns from those asset classes since May 2015 is shown below. Equities & Hybrids perform as expected, with negative Total Returns. In theory corporate bonds should be negatively correlated – but were they? The chart shows a portfolio of 16 corporate bonds (16 XTBs on ASX as a proxy) that withstood the acid test to deliver positive Total Returns in line with the theory. A demonstration under fire of the defensive, low volatility, capital stability characteristics of corporate bonds, which stood up when portfolios needed them. Watch the earlier discussion: