Those hoping for a return to the roaring returns of the 1980s and 1990s could be in for a nasty surprise. Toby Nangle of asset managers Threadneedle points to Bank of England data stretching back to 1700, showing that the 1980s and 1990s uptrend, which many investors have come to think of as equities’ ‘normal’ behaviour, was a one-off boom.
A look at the big picture suggests that the volatile, overall sideways trend we have experienced since 2000 is stocks’ typical behaviour, and that this pattern returned after an exceptional jump in the 1980s and 1990s. British stocks, adjusted for inflation, made practically no gains between 1700 and the 1970s.
So we may not be able to count on another powerful long-term bull market once we have finally recovered from the post-credit-crunch hangover. Whatever happens in future, however, Nangle’s chart is a powerful reminder of the need to seek out dividend-paying stocks and keep reinvesting the income: longer-term, capital gains are far harder to come by than investors spoiled by the 1980s and 1990s realise.