Last week, we looked at 140 years of Equity Yield vs US Bond Yield.

A people inquired what the total return would like of the S&P500 with dividends reinvested) compared to 10 year US bond with coupon reinvested. Global Financial Data generated the chart below, creating an approximate SPX and 10 Year over that entire period.

After two centuries, its no contest. Stocks actually do beat bonds — for the really really really long time.


Click to enlarge:

Source: Global Financial Data


Thanks, Ralph !
Ralph Dillon

Category: Markets

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.

17 Responses to “S&P500 Total Return vs Bonds (1800-2012)”

  1. [...] Global Financial Data; h/t Barry Ritholtz Share this:TwitterFacebookLike this:LikeBe the first to like [...]

  2. wcvarones says:

    That’s really interesting considering the S&P 500 originated in 1957.

    Any backfill data prior to 1957 is subject to selection bias and should be viewed very skeptically.

    How about a chart from 1957 forward using unambiguously legitimate data?

  3. MayorQuimby says:

    No, they do not. The SPX is an ever changing grouping of top equities as is the DOW. But only 2 Dow components were in the DOW 30 or 40 years ago.

  4. wcvarones says:

    This guy’s numbers are seriously screwed up. Look at the value for bonds in 1957: about 0.1. and in 2012: about 3.

    You telling me bonds are up 30-fold from 1957 to now while stocks are only up 3 or 4x from 15 to 50 or 60?

  5. lonr505 says:

    assuming the data in the chart is accurate, it shows the fallacy of individual 401ks.

    No person or corporation is capable of having a 200-year investment horizon, only sovereign governments.

    Being 100% equity is no help for an individual as peak earnings hit in the 40′s/50′s and retirement starts at 65. at most you get 30 good years of investment in the risky half of the risk spectrum.

  6. wcvarones says:

    Ah, a digit is missing off the left side of the image, so it’s probably 1050 for stocks. OK then. Still, don’t trust the pre-1957 data or especially the pre-1900 data.

  7. KeepPrinting says:

    I can usually pick up on your sarcasm, but from some reason I’m not feeling it today. Weren’t you preaching about the biases built into pre 1900 data like two weeks ago?

  8. CANDollar says:

    so there is a process of selection bias that would make SP500 returns better than otherwise?

    Wonder what the returns from both would be with management fees deducted? Bond managers would have charged much less over 140 years than equity managers – compounding this might equalize returns.

  9. Great chart! the implication is clear: What does a better job in protecting your savings, the government or private companies? Morale: Be careful!!!

  10. Richard Kain says:

    Always fun to see how buy & holder would have done from 1800 on, but as in Jeremy Siegel’s books, if you don’t count the impact of dividend taxation (quite substantial for the last 100 years) these comparative returns are very misleading — having bought and held from 1800 to 1861 you’d hopefully be among the first to be taxed in the united states but then really get whacked by mid 20th century.

  11. victor says:

    1) “Stocks actually do beat bonds — for the really really really long time”: really? and who’s to decided that a 140 years is truly a “long, long time”, especially that the pre 1957 data is dubious at best? worse, anyone who took and passed Statistics 101 would immediately question the meaning of this chart as the data are not RANDOM thus the only value of the chart is illustrative/historical but devoid of any statistical significance.

    2) And even if you accept that stocks beat bonds over time (whatever that means) there is no guarantee that stocks will continue to do better in the future as Benjamin Graham so eloquently explains in “The Intelligent Investor”.

  12. [...] – So, apparently stocks actually do beat bonds — for the really really really long term. [...]

  13. postpartisandepression says:

    what is striking in the graph is the change. From about 1980 the rate of return on bonds begins to equal that of stocks and from at least 2000 the return on stocks has flattened while bonds seems to still be on the rise. So what is responsible for the change in 1980? And have stocks really leveled off or will they take off again? My guess is no they will not because there has not yet been any recognition of what needs to be done to repair our system. So is this the beginning of the era of bonds?

  14. Lord says:

    I suspect if we had data on actual money flows in and out these markets over history, these curves would actually align. While equities with reinvestment have returned 7%, the safe withdrawal rate for them has only been about half that, which leads me to believe that represents actual market returns. Investors like to have their cake and eat it too and so are willing to trade volatility for gain, but only if it can provide as much income as bonds, and will shift their portfolios to make that the case. Since bonds in the long run return the growth of the economy, stocks will do as well but also grow in value proportionally with the economy as well. To do otherwise would create an inbalance in returns and lead to one shrinking and the other growing over the long haul. (Note that this cannot really be determined from dividends as the dividend ratio has changed over time and dividends are not the only way of extracting money from the market, though it does suggest a 50% dividend payout is optimal for the market as a whole.)

  15. Berkeley Maven says:

    Two hundred years of data is not likely to reliable, and there are certainly no guarantees in economic life. I am left with this question: if stocks were not very likely to outperform bonds over long but reasonable timeframes, e.g. 20 or 30 years, why would anyone own them, given their much higher risk? Capitalism is structured to given owners higher returns for the risk they take, and owners don’t live forever.

    I suspect that if you compare a diversified stock portfolio to a diversified bond portfolio over the last 100 years, you’re not going to find many 25 year periods where bonds did better. The recent blabber about bonds outperforming over the last 30 years is dubious, as I don’t know anyone who only holds 30 year Treasuries in their fixed income allocation, and adding small caps and foreign stocks to the S&P500 really helped.

  16. smudger says:

    To compare SPX Dividend Yields with US 10YR Treasury Yield is ABSURD! Enough to make me cough up my Heineken.

    The nearest fair comparison would be yield from the Dow Jones Corporate Bond Index — unless you are some Wall Street spiv that wants to push stocks that is ;) And from what I have read Barry ain’t no such creature unless he’s been morphing …

    $DJCBP is the symbol but I am not sure if the chart would not be net of dividends paid out. Mr Gillon would be the man to sort that if he is truly to earn his cold beer.

  17. A7LB says:

    Well Mr. Ritholtz, many legitimate questions have been raised here.
    In particular, does the ’200 year’ S&P stock chart include the myraid companies which went bankrupt?
    If not, the S&P graph is seriously misleading.

    Could you please come down from Olympus a moment, and answer some of the questions above?
    If you don’t know, fine, just say so. But the silence thus far is deafening…

    Thank you.