We’re bored, but still bears
If you bought US shares at the peak of the market in 2007 and have reinvested all your dividends ever since, you are now pretty much evens. You might not think that zero (or -15% or so in inflation-adjusted terms) is much of a return over nearly five years. But given the extent of the global financial crisis it has coincided with, you should probably be grateful for it.
The question is: how long will it take for you to be more than evens? If you listen to Goldman Sachs, the answer is “not long at all”. They think that after the disasters of the banking crisis, we are now at the beginning of a splendid bull market.
We sum up the argument here: The return of the bull. It boils down, first, to the fact that US equities yield significantly more than bonds, which hasn’t been the case since the 1950s, and, second, to the idea that the next decade will see extraordinary global growth.
Do we agree? We’d like to: we are bored bears here. But we aren’t yet convinced. The yield argument is tricky given sovereign yields are artificially low. If they weren’t, would the argument stack up?
• Read the full editor’s letter here: We’re bored, but still bears.