Equities for the Long Haul?

The past three decades have seen unprecedented flows into fixed income funds. Throughout that time, however, U.S. equities have outperformed fixed income regardless of market events. Comparing the last 30 years of equity performance to that of investment grade bonds makes a strong case for the value creation potential of equities.
  

  • An investor who allocated $10K to the S&P 500 30 years ago would have seen that investment grow to $224.5K as of the end of November 2017, but a similar investment in the Barclays US Aggregate Bond Index would have grown to just over $64K. The cumulative dollar differences between equity and bond investments have been significant.

  • Bonds typically exhibit less volatility than equities but even during times of great instability, such as when the dotcom bubble burst in 2000 or the Global Financial Crisis took place during 2006-2008, the S&P 500 sustained its cumulative outperformance relative to the Barclays US Aggregate Bond Index.

  • Market turmoil is inevitable but investing in equities may pay off over the long term. Moving in and out of equities may reduce the long-term rewards of remaining invested, especially for investors with longer term investment horizons.

  • Investors should be mindful that the bond returns depicted above occurred in an unparalleled 30-year bull market for bonds. Given currently low interest rates, such returns may be less likely to persist in the next 30 years.


The views expressed are the views of Fred Alger Management, Inc. as of January 2018. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

Fred Alger & Company, Incorporated 360 Park Avenue South, New York, NY 10010 / www.alger.com

800.305.8547 (Retail) / 212.806.8869 (Institutional)