22nd edition of Credit Suisse annual book launches

Latest Yearbook now covers Emerging Markets over 1900–2020

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Explorations of the best long-run financial investments, the impact of the decade-old global financial crisis, recovery patterns from the initial pandemic collapse, and estimates of equity risk premiums are just some of the issues which continue to spur abiding interest in long-run returns.

Published by the Credit Suisse Research Institute in collaboration with London Business School, the Credit Suisse Global Investment Returns Yearbook is the authoritative guide to historical long-run returns.

Covering stocks, bonds, bills, inflation and currencies in 32 individual markets (including nine new markets this year) and the 90-country world index. 23 of these countries have 121 years of data since 1900. The 2021 Yearbook provides detailed analysis of emerging markets (EM).

Key findings from the long-term perspectives in the latest Credit Suisse Global Investment Returns Yearbook are as follows:

- The stock market crash triggered by the spread of COVID-19 was the most rapid in history, apart from the October 1987 Crash. The market fell 35% in just 23 trading days. Recovery, however, in the USA and many other markets was exceptionally swift fuelled by massive fiscal and monetary stimulus; then later in the year, markets were driven higher by news of vaccines.

- Equities still remain the best long-run financial investment ahead of bonds and bills. Over the last 121 years, global equities have provided an annualized real USD  return of 5.3% versus 2.1% for bonds and 0.8% for bills.

- Since 1900, equities have outperformed bonds and bills in all markets. For the world as a whole, equities outperformed bills by 4.4% per year and bonds by 3.1% per year.

- Prospectively, the authors estimate that the equity risk premium will be around 3½%, a little lower than the historical figure of 4.4%, but still implying that equity investors can expect to double their money relative to short-term government bills in 20 years, despite the low real interest rate environment.

- The USA remains the world’s largest equity market by a huge margin, and today accounts for 56% of the world’s investable, free-float market capitalization. Japan (7.4%) is in second place, ahead of China (5.1%) in third place, and the UK (4.1%) in fourth position.

- While all markets were exposed to COVID-19, a number of EMs were fast to get the virus under control, including China, South Korea and Taiwan (Chinese Taipei), which together represent about two-thirds of the overall value of EMs.

- Over the very long run, since 1900, EM equities have underperformed developed market (DM) equities by 1.4% per year, while EM bonds have underperformed by 2.2%. This underperformance can be traced back mostly to the 1940s. Since 1960, EM equities have outperformed DM equities by around 1.5% per annum.

- Investors benefited from high returns in the 1980s and 1990s. Since then, real equity returns have been below their historical averages, despite the strong recovery since 2009 and the successful weathering of the pandemic storm. Three bear markets in just two decades have provided a timely reminder of the considerable risk involved in equity investment.

- In the second decade since the turn of the millennium, investors were fortunate; markets recovered quickly from the global financial crisis, which was followed by more than a decade of strong returns. They then recovered even faster from the initial pandemic collapse.

In the Yearbook, renowned financial historians and London Business School Professor, Paul Marsh, Professor Elroy Dimson, chair for the Centre for Endowment Asset Management at Cambridge Judge Business School, and Emeritus Professor of Finance at London Business School and Dr. Mike Staunton, Director of the School’s London Share Price Database, assess the returns and risks from investing in equities, bonds, cash and currencies in 23 countries and five different composite indexes since 1900. This year, they have broadened their database to include 90 DMs and EMs and they present detailed analysis of nine new markets.

They also examine the industrial transformation that has taken place since 1900, alongside the parallel transition in markets as countries have moved from emerging to developed status. They review factor investing and the profitability of different investment styles.


The Global Investment Returns Yearbook 2021 Summary is available here

Charts and analysis: For charts or graphics, contact edimson@london.edu, pmarsh@london.edu, or mstaunton@london.edu


About the Credit Suisse Research Institute

The Credit Suisse Research Institute is Credit Suisse's in-house think tank. The Institute was established in the aftermath of the 2008 financial crisis with the objective of studying long-term economic developments, which have – or promise to have – a global impact within and beyond the financial services. Further information about the Credit Suisse Research Institute can be found at www.credit-suisse.com/researchinstitute.