click for larger chart

Source: Bianco Research

 

 

Last week, I referenced the fact that Bonds had been outperforming stocks for quite some time. Burton Malkiel and Jeremy Siegel continue to doubt this.

Now, if we want to discuss going forward 10 years, well, with rates at 1.5%, bonds are not where I would place my heaviest bets to outperform stocks. But that is what their recent history has been. Indeed, since 1981, long-term government bonds have gained an average of 11.5% per year, handily besting equities. The S&P 500 index gained the 10.8% per year over the same period (1981-2011).

Have a look at the more recent chart above via Bianco Research. It shows the total return for Golds, Treasuries and Equities. Total returns include both dividends for equities and interest payments for bonds.

 

 

Previously:
Bonds Beat Stocks: 1981-2011 (October 31st, 2011)

See also:
Say What? In 30-Year Race, Bonds Beat Stocks (Bloomberg)

Dogs talk! Bonds beat stocks! Dealing with the unexpected (USA Today)

Bonds Beat Stocks for the Last 30 Years—What Now? (US News)

Category: Fixed Income/Interest Rates, Investing, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Stocks versus Bonds versus Gold (2010-2012)”

  1. mwfadil says:

    why would anyone argue with or even listen to Jeremy Siegel?? don’t waste your time or your breath. it’s amazing that he still has a job a Wharton… it’s supposed to be a great school…

  2. llandson2000 says:

    Barry, wouldn’t it be worthwhile to look back to the point in time when Japan’s 10-Year rate first declined to 1.5%, then examine future returns for bonds, equities, and gold? I suspect the returns for bonds continued to be strong, perhaps even better than for equities. So it’s certainly possible.

  3. socaljoe says:

    Isn’t it misleading to characterize this comparison as “stocks vs. bonds vs. gold”?

    Does the SP500 really reflect the performance of the global universe of stocks available for investment?

    Does the 30 year treasury reflect “bonds”?

    How useful is this comparison to the investor who does not use the SP500 and 30 year treasury primarily for their equity and fixed income exposure?

    ~~~

    BR: Yes, that is the standard benchmark . . .

  4. jimcos42 says:

    But wait! Isn’t there some cherry-picking, some confirmation bias, going on here?

    In this example, “bonds”, to me, would have to mean something broader, like the Barclays Aggregate, which would come in at around 119 on the chart.

    It’s misleading to just use the T30, no?

  5. Moopheus says:

    It kinda looks like the lines are headed for convergence, not unlike a trio of proton beams, with possibly similar results.

  6. Joe Friday says:

    BR: “Now, if we want to discuss going forward 10 years, well, with rates at 1.5%, bonds are not where I would place my heaviest bets to outperform stocks.

    I dunno.

    That was the ‘Conventional Wisdom’ six months ago, yet long-term 20-year zero coupon Treasuries have returned 11% (22% annual), and in more than a half a dozen countries in Europe you can find zero or negative interest government bonds.

    People keep saying it just can’t go any lower, but it keeps going lower.

  7. hawks5999 says:

    Barry, do you think we are still on track to have gold underperform the Dow in ~2013 as shown in this 2006 post? http://bigpicture.typepad.com/comments/2006/04/dow_jonesgold_r.html

  8. machinehead says:

    ‘In this example, “bonds”, to me, would have to mean something broader, like the Barclays Aggregate, which would come in at around 119 on the chart.’ — jimcos42

    Not only does the Barclays Agg have big chunks of corporate bonds and mortgage backed securities, but also its duration is only about 4.5 years. So it’s a sleepy backwater, usually.

    If you want a pure, liquid play on bonds that can really run under the right conditions, longer-maturity Treasuries (10 years and up) are the place you oughta be.

    Mortgage-backed securities, owing to the customary refinancing option given to borrowers, have particularly ugly characteristics. You won’t find no MBS crap in my portfolio.

  9. constantnormal says:

    In this time frame, as well as the previously spotlighted intervals, bond returns have soared, not from coupon clipping, but price appreciation as yields fell (to near-zero).

    What are the odds that the next 2 (or 10, or 30) years will see a similar phenomenon … of course, bonds do not have to increase in value to outperform falling stocks … but that assumes that an economic calamity does not produce a wave of bond defaults …

    The future remains an unread book …

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