Stocks for the Long Run?

by Econom­pic­Data

While the below chart cherry picks one of the best per­form­ing fixed income sec­tors, it is still pretty amazing.

Bonds (defined in this exam­ple as the Bar­clays Cap­i­tal Long Gov­ern­ment / Credit index) have now out­per­formed stocks (defined as the S&P 500 index) going back to Novem­ber 1980 (10.7% annu­al­ized vs. 10.4% annu­al­ized) and has more than dou­bled the per­for­mance of stocks over the past 15 years (239% vs. 108%). Note the chart below is total returns includ­ing rein­vest­ment coupon pay­ments and dividends.

Is this likely to continue?

Unless cap­i­tal­ism as we know it ends, the answer is a sim­ple 'no' over the next 15 or 32 (or even 3–5) years. The gov­ern­ment / credit index shown above yielded a whop­ping 13.18% as of Novem­ber 1980 and the next 32 years were the great bond run that has resulted in the cur­rent pal­try yield of 3.89% (just 7 bps off its all-time low).

Source: Bar­clays Cap­i­tal / S&P

Copy­right © Econom­pic­Data