This year has been the worst year for investors since 1974, says Eric Roseman over at The Sovereign Society. Only commodities and foreign currencies have offered strong returns. But both are extremely volatile and are currently heading south.

Eric says investors need to ride out the summer and look for entry points in the fall. This is when market bottoms historically arrive.

Until then, it may be scraping the bottom of the barrel, but at least cash and  offer some protection…

Brick walls are everywhere in 2008. That’s how to best describe one of the worst calendar years for global investors since 1974. The MSCI World Index is already down 14% thus far in 2008. And we just overtook 2002 in terms of negative total return. 

The last time stock performance was this miserable was during the Nixon and Watergate era. And that’s only after barely seven months of trading.

But it’s not just global equities getting slammed in 2008. Other relatively conservative investments have been crushed too.

Real estate investment trusts (REITs) are down another 3.5% this year. High-yield bonds and investment-grade corporate bonds are down over 3% and convertible bonds have declined more than 5%. Even super-safe Treasury bonds have risen just 2.3%. In other words, you’re barely breaking even once you factor in surging inflation and taxes.

To be sure, commodities and foreign currencies have been the only two asset classes that have logged solid returns during this miserable year for investors. But even here, commodities and many foreign currencies have produced negative total returns since late June as the dollar has stabilized against most currencies.

If that wasn’t bad enough, commodities are now correcting heavily after a major rally since last fall. Now commodities sit 13% off their best levels. The mighty euro, up 7% this year against the dollar, has actually declined 5% from its all-time high. And the yen has struggled since March, down more than 9%.

Also, anyone over-weighted in raw materials will tell you July is a painful month for hard assets. For the record, the summer is also typically a bad time of the year for natural resources. That’s certainly true now.

As for the benefits of international diversification, forget it. It’s a horror story overseas. In 2008, the BRICS have crashed over 16% while the MSCI Emerging Markets Index has tanked more than 15%.

Okay – time for some good news: If you’re sitting pretty in cash and T-bills, congratulations!

Cash, despite offering lowly yields under 2% at least protects your nominal principal. But adjusted for inflation, T-bills are paying about 60% less than the official rate of U.S. inflation at 5%. That’s a 17-year high. Compared to stocks this year, at least you’ve got your principal.

At some point, of course, this bear market will end. I suspect that point will arrive when housing bottoms and the credit crisis finally ebbs.

Most market lows historically arrive in the fall and I think this one won’t be any different. October or November might offer excellent entry points for investors – IF housing and credit bottoms. Also, a sharply lower oil price would be great for stocks.

We’ll have to wait and see. Until then, hang in there. I’ll be right here guiding you through this mess with the best long-term solutions to this short-term misery.

Source: The Two Places You Can Hide from These Miserable Markets