Investment Returns Yearbook 2023 Look Promising for Equities

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Swiss Wealth Management firm Credit Suisse published its Global Investment Returns Yearbook last week. The yearbook is seen as an authoritative guide to historical returns. This year, the odds favour equities more than bonds.

Credit Suisse published the yearbook in collaboration with the London Business School, and it takes into account 123 years’ worth of data going back as far as 1900. 

Amanda Cheesley, deputy director for Wealth Briefing Asia, reported that the yearbook “covers all the main asset categories in 35 countries. This year, it focuses on commodities and inflation, and the authors examine whether investing in commodities offers an effective hedge against inflation. Rising commodity prices, particularly energy-related, have been a key driver of the steep rise in inflation in 2022. The authors explore the role that commodities play as an asset class.”

According to the report, in terms of long-term perspectives, “Equities have performed best over the long run. Over the last 123 years, global equities have provided an annualised real USD return of 5.0% versus 1.7% for bonds and 0.4% for bills.”

Professor Paul Marsh of the London Business School also added that the yearbook reminds investors to review the long-term investment horizon. Marsh, along with the yearbook’s co-authors Elroy Dimson and Mike Staunton, noted that the estimate on equity risk premium would only be around 3.5 per cent, significantly below the historical figure of 4.6 per cent.

Equity investors may expect to double their money relative to short-term government bills in 20 years. The authors also noted in the yearbook that in 2022, the law of risk and return pushed bonds to their worst year. And the return projections for the next generation of bonds will continue to be less favourable.

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