this year is not shaping up to be the worst in us history for a balanced 60 stock40 bond portfolio it’s important to point this out not just to correct the misleading historical narrative that has been spreading around some corners of wall street—a narrative i’ve seen mentioned a halfdozen times over the last few weeks it’s also important because retirees and others who invest in balanced portfolios may be tempted to respond impetuously if they believe that what they’ve suffered this year has never been experienced before it most definitely has happened before as i’ll discuss in a moment but first there’s no denying that it’s been a bad year for balanced stockbond portfolios your yeartodate loss through sep 15 would be 204 if your portfolio allocated 60 to the vanguard total stock market index fund vtsmx and 40 to the vanguard long investment grade fund vwesx  for the full year 2021 in contrast this portfolio would have gained 144 according to factset data it would have done even better in 2020 gaining 187 with doubledigit gains like those many retirees became spoiled expecting something similar this year as well but when we expand our vision to the longterm we see that the 6040 portfolio’s yeartodate performance while worse than the historical average is by no means the worst in fact you don’t have to go that far back to find a calendar year that was even worse in 2008 a 6040 portfolio invested in vtsmx and vwesx lost 213 to determine which year was the worst for a balanced stockbond portfolio i turned to the historical database dating back to 1793 compiled by edward mcquarrie professor emeritus at the leavey school of business at santa clara university because mcquarrie’s series of 12month returns over the last 200 years is calculated on a januarytojanuary basis instead of decembertodecember they are not strictly calendaryear returns but order of magnitude they provide the necessary historical context the worst 12month period for a balanced portfolio was from january 1931 to january 1932 over which a 60 sp 50040 long investment grade bond portfolio lost 363 according to mcquarrie’s calculations which take dividends and interest into account the nextworst occurred over the 12 months through january 1842 when such a portfolio lost 271 in third place was the 12month period through january 1938 when it lost 245 if the 6040 portfolio this year stays flat for the remainder of 2022 it will be the fifthworst since 1793 not good but not the worst either what happened after past bad years for the 6040 portfolio an even better reason not to jump off a cliff is the performance of the 6040 portfolio following past occasions in which it lost as much or more as it has this year over the five subsequent years following those past occasions the portfolio turned in wellaboveaverage returns—as you can see from the table below i constructed the table using mcquarrie’s database this difference is significant at the 94 confidence level just 1 percentage point shy of the 95 confidence level that statisticians often use when determining if a pattern is genuine on the assumption that the future will be like the last 229 years therefore you should not be too quick to throw in the towel on your balanced stockbond portfolio think of it this way the 6040 portfolio’s handsome longterm returns are compensation for the risk that you’ll suffer a year like 2022 hoping to capture those returns while avoiding their inherent risk is magical thinking akin to wanting something for nothing with what you’re feeling right now you are paying your dues mark hulbert is a regular contributor to marketwatch his hulbert ratings tracks investment newsletters that pay a flat fee to be audited he can be reached at markhulbertratingscom