If you’re investing for the long term, history shows that stocks will give you the win.
Over the past 200 years, stocks have generated real returns of 4.9% annually, according to Deutsche Bank’s Long-Term Asset Return Study, which analyzed data from 56 economies dating back to the 19th century. A traditional 60/40 portfolio approached 4.2%, while government bonds returned 2.6% and gold (GC=F), often touted as a safe haven, lagged far behind at just 0.4%.
“History shows that investors have consistently been rewarded for taking risks and combining the dividends and coupons available in stocks and bonds,” wrote Deutsche Bank analysts Jim Reid and Galina Pozdnyakova.
But before rushing to pile on shares, the report points out another key factor to consider: initial valuations.
Markets that look cheap tend to generate strong long-term gains, while those starting from rich valuations often underperform. Over the past 70 years, portfolios built from low-valuation stocks outperformed high-valuation stocks by almost 9 percentage points per year.
The US market has been an exception lately, delivering global-beating returns despite expensive valuations. But Deutsche Bank researchers warn: “It is the exception, not the norm, internationally and historically.” The S&P 500 (^GSPC) is up 17% in 2025.
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Economic growth, demographic trends, and even inflationary policies play a critical role in returns. The report found that nominal GDP growth (the combination of real growth and inflation) is the only “long-term anchor for asset returns.”
Over the last century, global GDP grew at an average of 5.7% annually, supporting strong performance by stocks and bonds. Sweden and the US have led the pack in equity returns over that time, returning 7.5% and 7.2% annually, respectively.
By contrast, Italy has experienced the weakest long-term stock market performance in the sample, generating only a 2.5% annual real return amid decades of political instability and slow economic growth.
However, global GDP is fading. In developed markets, nominal GDP has fallen to levels last seen in the 19th century. The result, according to Deutsche, is that by the end of 2024, real 25-year equity yields in advanced economies had fallen to their lowest level in more than a century.
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Furthermore, slower population growth and weak productivity growth could mean that the next century will not be as generous as the last. Thirty-two countries are expected to decrease their working-age population, while 21 could face an overall contraction of their population by 2050, notes Deutsche.
