Top performing market: Global equities deliver 5.20% CAGR since 1900; this market is top performer

NEW DELHI: The global equity market has provided an annualised real return of 5.20 per cent over the past 120 years, according to a study by Credit Suisse. The return is far higher than 2 per cent and 0.80 per cent given by bonds and treasury bills, respectively, during the same period.

With a return of 6.80 per cent per annum, Australia emerged as the world’s best-performing stock market since 1900 in dollar terms, ahead of the US (6.50 per cent) and New Zealand (6.40 per cent).

The study published in Credit Suisse Global Investment Returns Yearbook 2020 also showed that the real equity returns since the beginning of 2000 have been acceptable, but they stood below historical averages, despite the strong recovery since 2009. The global market delivered an annualised return of 3.10 per cent since 2000, while bonds gave 4.8 per cent CAGR return during the same period.

World markets witnessed the financial crisis in 2008, which reminded the risk involved in equity investment.

The yearbook also highlighted that when real rates are low, future real returns on all assets tend to be lower.

“With real interest rates around zero, the expected return on stocks is just the equity risk premium,” Credit Suisse said.

It also showed that investors are increasingly concerned about ESG (environmental, social and governance) issues and asset managers are under pressure to show they invest responsibly.

The Global Sustainable Investment Alliance report shows that investment products linked to ESG had a total value of $31 trillion in 2018. At present, the figure is probably closer to $40 trillion.

The countries included in the yearbook represented 98 per cent of the global equity market in 1900 and still represent over 91 per cent of the investable universe at the start of 2020, Credit Suisse said.