Global Investment Returns Yearbook: key highlights

The Credit Suisse Global Investment Returns Yearbook is based on a unique database that offers a historical record of the real returns from equities, bonds, cash and currencies for 35 countries. The data spans developed and emerging markets, and stretches back to 1900. As well as being an important source of rich data on long-term investment returns, the 2023 edition contains analysis on topical issues that investors face today.

Amid turmoil, a long-term perspective still matters

We believe that long-term perspective matters and with it an appreciation of the laws of risk and return. Our analysis on long-term returns shows how equities have outperformed bonds and bills in every country since 1900, reflecting such basic principles.

While bonds have provided equity-like returns since the 1980s, the inflation shock of 2022 meant real bond returns were the worst on record for many countries, including the USA, UK, Switzerland and for developed markets overall.

We have also been served up the reminder that inflation is far from helpful for equities. While equities have enjoyed excellent long-run returns, they are not and never have been the hedge against inflation that many observers have suggested.

Risk premia exist for a reason

A historical risk premium in equity and bond returns relative to bills exists for a reason, that being a necessary payment for the risk of volatility and drawdown. After a prolonged period of high and stable real returns, our report documents the periods of stress over time for bonds and equities. The Yearbook has shown how portfolio diversification can mitigate such risks.

However, reaping the benefits of diversification is also a long-term concept and can let you down in the short term. The recent fortunes of 60/40 equity/bond strategies are a painful case in point, having trusted too heavily in the recent negative correlations between the two assets rather than properly consulting the history books.

Reappraising commodities in an era of stagflation

This year’s focus chapter delves into the pernicious influence of inflation on returns from bonds and equities, but also the role of commodities within the mix. A look at the highly topical subject of stagflation rather than just inflation provides added reason for investor concern. There is also troubling news for the growing consensus that conditions will return to normal with low inflation re-established. A keener look at history would highlight how rare this actually is.

Rising commodity prices, particularly energy-related, have of course been a key driver of the steep rise in inflation we have witnessed in 2022. However, we explore the role that commodities play as an asset class. Our finding is that while investing in individual commodities have themselves yielded very low long returns, thanks to the power of diversification, portfolios of futures have provided attractive risk-adjusted long-term returns.