During the past 25 years, the total return for U.S. equities has been lower than for U.S. 10-year government bonds: –47% in real (inflation-adjusted) returns for stocks vs. +71% in real returns for bonds. With the 10-year Treasury yield currently at 2.7%, the bar has been set quite low for stocks to outperform bonds prospectively.
[4/6/09] For the past 40 years too says Bill Gross
[2/18/10] Most people would consider 40 years to be the "long run." So, it is rather disconcerting, or shocking as Rob puts it, to find that not only have stocks not outperformed bonds for the last 40 plus years, but there has actually been a small negative risk premium.
How bad is it? Starting at any time from 1980 up to 2008, an investor in 20-year treasuries, rolling them over every year, beats the S&P 500 through January 2009! Even worse, going back 40 years to 1969, the 20-year bond investors still win, although by a marginal amount. And that is with a very bad bond market in the '70s.