Despite recent strong stock performance, Deutsche Bank strategists reminded investors that the past 25 years haven’t been particularly stellar for stocks. Their report outlines how, since 2000, global markets and economies have been shaped by rising debt levels, slower demographic growth, and stalled globalization.
In 2000, for instance, the U.S. Congressional Budget Office anticipated paying off federal debt by 2013. Instead, the debt-to-GDP ratio climbed to over 100% for the first time since World War II.
For investors, the S&P 500’s journey from December 31, 1999, onward has been marked by volatility, including the dot-com bust, the 2008 financial crisis, and 2022’s inflation spike.
These turbulent years have left the period with the second-lowest compounded annual returns among nine 25-year spans since 1800, with only the early 20th century performing worse.
This might resonate with those wary of a “lost decade” for stocks, as firms like Goldman Sachs and Vanguard warn of muted returns in the years ahead.
The Deutsche Bank report also highlights that stocks have not only underperformed on an absolute basis but have also lagged behind gold.
Since 1999, gold has delivered an annualized return of 6.8%, outpacing the S&P 500’s 4.9%. Even in 2024, gold slightly outperformed stocks, with a 25.6% gain year-to-date.
Still, Deutsche Bank argues that equities remain the best option for long-term investors. While certain periods see stocks underperform, this trend rarely persists beyond a decade.
Furthermore, with global debt levels potentially setting the stage for another inflationary period, stocks could fare better than bonds, which suffered in 2022.
