It’s Dangerous to Stay Out of Stocks

Today’s Points:

  • History is clear; it’s very, very dangerous to get out of stocks altogether;
  • Buy Now, Pay Later is a big deal, to which Bloomberg has devoted a Big Take;
  • It’s helped the most vulnerable — but it might be distorting consumption data;
  • AND Stormy Daniels can never match the courtroom drama of Marisa Tomei

Stocks for the Long Run

Points of Return often argues for caution on stocks. It never argues to get out of them altogether. That’s because history demonstrates that over long time spans it’s very dangerous to be out of the market altogether. With the recent publication of this year’s edition of Barclays PLC’s long-running Equity Gilt Study, which started as a running comparison of the returns on UK stocks, bonds and cash over the very long term, there is more evidence.

This is possibly the most important “money chart,” showing the total range of returns for different asset classes in the US since the Barclays data starts in 1925. Over short periods, it confirms that equities can inflict really serious losses; the greatest on record have been worse than for bonds and equities. But the longer term is your friend. Over no 20-year period since 1925, a span that includes both the stock market crash of 1929 and the global financial crisis of 2008, have equities failed to beat inflation. That cannot be said of any other asset class:

And to look at the magical effects of compound interest, this is what would have happened to investments in cash, bonds and equities for someone who invested in 1925 and then held it (presumably passing it on to descendants somewhere along the way):