The Barclays Equity Gilt Study (EGS), now in its 59th edition, is one of the most frequently quoted sources of long term stock market performance. Barclays’ data on UK investment performance goes back to 1899, giving it a perspective few can match. A good example is a table in the study that shows the inflation-adjusted performance of UK shares, gilts (government bonds) and cash (Treasury bills) for ten yearly periods starting in 1903, reproduced below in graphical form.
One surprising aspect of these numbers is that over the last ten years, to quote Barclays “Cash … delivered the worst returns since the stagflationary 1970s”. While inflation was memorably high in the 1970s and early 1980s – 1975 saw annual inflation of 24.9% – interest rates were also at peak levels – base rate reached 17% in 1979. In the last ten years inflation has been largely under control – if not within the Bank of England’s target – but the last five years of 0.5% base rates have hit post-inflation returns.