History yields a compelling case

bonds

Recent bear markets turned a number of investors to bonds, but equities are now doing better and provide higher long-term returns

Whether to play safe with bonds or take on risk with equities is an eternal dilemma. Equities have been something of a stormy journey over recent years so many have headed for the safe haven. But equities have made a comeback recently, while bonds have arguably become expensive, so perhaps it is time to look at the bigger picture. We have carried out extensive research on the historic performance of equities over bonds - the equity risk premium (ERP) - and made predictions for the future. Table 1 shows our findings. The first section, 'Observed ex-post ERP', shows the historic percentage o...