Global share yields are attractive. Especially in the long term.
Investing on the stock exchange almost always pays off in the long term for investors. This is because global share yields are generally very attractive over a decade. Good prospects for investors.
Global share yields were positive in almost every decade
Even if the markets were shaken at the beginning of the year, looking back at the past investment decade, there is a clear upward trend. Over the past ten years, equity and bond indices have reached record highs almost everywhere in the world. For instance, since 2010, the S&P 500 has achieved a total cumulative performance of 253 percent, the second-best bull market in its history. And equities are likely to continue to offer the highest yields over the next five years.
These are all good reasons to take a closer look at the long-term performance of equities. Three observations caught our attention:
- First, equities generated solid total returns in seven out of nine decades. The two exceptions were the Great Depression of the 1930s and the Great Recession of the 2000s.
- Second, the importance of dividend yields was demonstrated. Historically, they made up around a quarter of total returns.
- Third, the last equity decade was not unusual. It was only the fourth-best in the past nine decades.
Global share yields were positive in almost every decade
Annualized returns per decade, in percent
Last data point: 2019
Source: Credit Suisse, Broker Research
Historical performance and financial market scenarios are not reliable indicators of future performance.
From a Swiss franc perspective, Swiss equities perform best
In an international comparison, the strong long-term performance of the S&P 500 is clear. In January 1990, the index was listed at 325 points; 30 years later, it opened at 3,244 points, almost ten times that. Other indices could not keep up with this evolution. During the same period, the SMI "only" quintupled, while the German DAX still managed to grow by more than 600 percent.
However, if all yields are measured in Swiss francs, the picture changes. The respective market performances are corrected for the currency fluctuations. Because the Swiss franc is historically the strongest currency in the world, the perspective changes significantly. It shifts once again when the dividend yields are taken into account. When these factors are taken into consideration, Swiss equities climb to the top of the yield ranking.
For Swiss investors, Swiss equities are the most attractive
Total return of equity country indices measured in Swiss francs
Index: 1.1.1990 = 100
Last data point: 6.1.2020
Source: Credit Suisse, Datastream
Historical performance and financial market scenarios are not reliable indicators of future performance.
High dividend yields make Swiss equities attractive in the long term
What does this mean for investors? From a Swiss franc perspective, Swiss equities are a long-term front runner. This is because the strong currency is only a curse from a bookkeeping perspective. Economically, it gives Swiss investors additional purchasing power. Furthermore, good dividend yields additionally highlight the quality of Swiss equities when compared internationally. Their compound interest effect is mainly visible in the long term. This means there are good prospects for Swiss investors – even in the new decade.
