Where UK stocks are heading in the long term

The recent impressive rally in British stocks needs to be put into perspective. So, what can investors expect in the longer term?

A successful long-term investor needs to put recent movements in various asset classes in perspective. Enter the annual Credit Suisse Global Investment Returns Yearbook, written by Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School. It spans 113 years of data across 25 countries.

The first basic message is that stocks beat bonds or cash over the long term. Global equities have returned an annual 5% after inflation since 1900, bonds 1.8% and cash 0.9%. For Britain, the figures are 5.2%, 1.5% and 0.9% respectively. British stocks have also beaten bonds since 1950 and 1980. In global terms, however, for the period since 1980, bonds narrowly beat stocks as the post-2000 bear market hit shares.

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