Historical Asset Class Returns: The 100-Year Scorecard
Historical asset class returns since 1928 for nine investments, from small caps to T-bills, and why only three of them grew faster than the money supply.
Topic
Asset Class Comparison: Nine Assets, One Scorecard
This asset class comparison puts nine investments on one scorecard so they can be judged by the same rule.
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In Part III we normalised everything to 1.0 in 1928 and divided each result by the growth in M2 over the same 97 years, which was 473x.
Ranked that way, US small caps and the S&P 500 with dividends reinvested were the clear winners, Baa corporate bonds only just beat M2, and the rest lost ground: farmland, gold, long-term government bonds, crude oil, US real estate and, at the bottom, T-bills.
- 64,626x US small caps since 1928 An M2-adjusted value of about 136.5, the top of the scorecard.
- 241.7x US farmland since 1928 Roughly half the rate of money printing.
- 25.8x T-bills since 1928 An M2-adjusted value of 0.055, the worst on the scorecard.
Articles on Asset Class Comparison
1 article from our research on this topic.
Plain-English definitions
Key terms for asset class comparison
- Normalised to 1.0
- Setting every asset to the same starting value so growth can be compared on one chart regardless of the original price.
- M2-adjusted value 1.0 = break-even
- An asset’s growth divided by M2 growth over the same years. Above 1.0 it gained share of the money pool, below 1.0 it lost share.
- Total return
- Price growth plus every dividend, rent payment or coupon put back into the investment, as opposed to price alone.
- Hurdle rate
- The return needed just to break even with money printing. In most decades since 1928 it was higher than the yield on safe savings.
FAQ
Questions about asset class comparison
Answers drawn from the figures in our research. Educational only, not financial advice.
How do the major asset classes rank against money printing?
From best to worst on M2-adjusted value since 1928: US small caps (136.5), the S&P 500 total return (24.4), Baa corporate bonds (1.14), farmland (0.511), gold (0.444), long-term government bonds (0.163), crude oil (0.126), US real estate (0.119) and T-bills (0.055). Anything below 1.0 lost purchasing power relative to the money supply.
Why compare asset classes against M2 instead of each other?
Because comparing them only with each other can make a loser look like a winner. Gold beat oil and housing on our scorecard, for example, yet all three fell well short of the growth in money. Using M2 as a common yardstick shows which of them actually added purchasing power, and in a century of data only three did.
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