Stocks returned 8% over the last decade, adjusted for inflation. Vanguard isn’t that optimistic for the next 10 years.

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Even after last year’s dismal returns, stocks adjusted for inflation still posted above-average returns for the decade, and were the only major asset class to appreciate in value.

That’s according to the 68th Equity Gilt study from Barclays, which tabulates the returns for assets adjusted for inflation. Adjusted for the consumer price index, U.S. equities skidded by 24.4% in 2022, which wasn’t even the worst of the major assets — Treasury inflation-protected bonds slumped 36.1%, government bonds dropped by 30.4%, and corporate bonds weakened by 30.1%.

Over a decade, equities returned 8% — the only positive asset class of the 2012 to 2022 period. That return over a decade was above the 6.6% long-run average since 1925.

The latest forecasts from Vanguard, released Monday, aren’t as bullish. The indexing giant is expecting average annual gains over the next decade from U.S. equities between 4.1% and 6.1%, and inflation between 2% and 3%, meaning that the real gain for stocks could be as low as 1.1%.

Vanguard is forecasting annual returns from Treasury bonds to be 3.3% to 4.3% per year, which is not dissimilar from the inflation-adjusted performance over the last 20 years of 1.4%.

The Barclays data also show that the worst-ever annualized return for U.S. equities adjusted for inflation over a 20-year period was 0.9%, though the firm cautions that it doesn’t mean it’s impossible to lose money over such a timeframe.

The story was similar in the U.K., where equities adjusted for inflation slumped by 11.5% last year, but grew 2.6% over the last decade. Over the last 123 years, U.K. stocks have grown by an average annual rate of 4.8%.

Barclays also ran the numbers to show the importance of reinvestment. The value of $100 invested at the end of 1925 in equities was $23,726 without reinvesting, and $791,966 with reinvesting. Adjusted for inflation, that’s the difference between $1,431 and $47,764.

This year the S&P 500

has gained 9% while the S&P U.S. government bond index has returned 2%. Consumer prices in the 12 months to April was 4.9%.


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