The chart below shows the US Wilshire 5000 total return index (incl. reinvestments of dividends) against gold, both rebased at 100 starting 40 years ago.
The stock market has obviously outperformed gold over the last 40 years, and it's likely to do so in the future.
Why?
1/4
The stock market has obviously outperformed gold over the last 40 years, and it's likely to do so in the future.
Why?
1/4
Stock market total returns are mostly driven by dividend yields, earnings growth and changes in valuations.
The distribution of dividend yields and earnings growth are skewed to deliver positive returns on average (dividend yields are positive, and earnings tend to grow).
2/4
The distribution of dividend yields and earnings growth are skewed to deliver positive returns on average (dividend yields are positive, and earnings tend to grow).
2/4
Changes in valuations can be very volatile, but the real return on risk-free rates alternatives (bond real yields) tend to influence BOTH valuations in stocks and gold prices.
Basically, gold gets a tailwind from lower real yields.
Stocks too, but also from DY + EPS growth!
3/4
Basically, gold gets a tailwind from lower real yields.
Stocks too, but also from DY + EPS growth!
3/4
Gold plays an important role in portfolios, as argued in this article of The Macro Compass
That doesn't mean gold will outperform every asset in the long-term, though
Actually, it's more reasonable to expect stocks to outperform gold in the long run
themacrocompass.substack.com/p/gold
4/4
That doesn't mean gold will outperform every asset in the long-term, though
Actually, it's more reasonable to expect stocks to outperform gold in the long run
themacrocompass.substack.com/p/gold
4/4
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