Barclays Equity Gilt Study 2011

2011
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ON THE LAST PAGE
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07/02/2011
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INSIDE FRONT COVER
"People almost invariably arrive at their beliefs

not on the basis of proof but on the basis of
what they find attractive"
Blaise Pascal, The Art of Persuasion
"History has not dealt kindly with the aftermath

of protracted periods of low risk premiums"
Alan Greenspan
Inflation is the one form of taxation that can be

imposed without legislation
Milton Friedman
"Markets can remain irrational longer than you

can remain solvent"
John Maynard Keynes
"If history repeats itself, and the unexpected

always happens, how incapable must Man be
of learning from experience"
George Bernard Shaw
"The greater our knowledge increases the greater

our ignorance unfolds"
John F Kennedy
Published by Barclays Capital

10 February 2011
ISBN 978-0-9553172-9-3
100
Barclays Capital | Equity Gilt Study
EQUITY GILT STUDY 2011
56th Edition
The Equity Gilt Study has been published continuously since 1956, providing data, analysis
and commentary on long-term asset returns in the UK and US. This publication is unique
not only for its longevity, but also for its focus on the medium and long term. The UK data
base goes back to 1899, while the US data provided by the Centre for Research in Security
Prices at the University of Chicago begins in 1925.
We use this opportunity also to focus our essays on longer-term issues. Chapter 1 makes
the case that current policy settings are extraordinarily easy and, if left in place for too long,
will result in destabilizing imbalances and stretched asset valuations. The focus of
policymakers on short-term results suggests that markets and economies are likely to
continue to exhibit a high degree of volatility, reminiscent more of the 1970s and 2000s
than the 1980s or 1990s. In Chapter 2, we focus on emerging markets as an asset class,
and assess whether the outperformance of returns relative to developed markets seen in
the last decade can reasonably be expected to continue. A thorough investigation of the
fundamentals suggests that the answer is yes, although the bulk of this outperformance is
expected to occur in equities. We also present an independent rating of EM risk by country
and region. Chapter 3 examines commodity prices and inflation, and concludes that the
disinflationary impact of low cost producers such as China and India is transitioning into an
inflationary influence. As a result, the disinflationary trend of the past 30 or so years
appears to be turning. Chapter 4 considers optimal investment strategies in a more volatile
investment climate a natural follow-up to Chapter 1. The recommended approach does
not require investors to time cyclical inflexion points and allows them to tailor their
portfolios to their appetite for risk. Chapter 5 re-examines the influence of demographics on
asset returns that has been a theme in previous issues of the Equity Gilt Study. Using more
robust testing methods, it re-affirms that aging populations are likely to lower returns on
both equities and debt, and that equities are still likely to outperform bonds over the next
decade, although less so than we had previously thought.
We sincerely hope that you find both the essays and the data useful inputs into your
investment decisions.
Larry Kantor
Head of Research
Barclays Capital
10 February 2011
Website:
www.equitygiltstudy.com
E-mail:
equitygiltstudy@barcap.com
CONTENTS
Chapter 1
Easy policies today, rude awakening tomorrow
Extraordinarily expansionary policies played a critical role in pulling the world out of the
financial crisis and severe recession of 2008-09. However, there are significant risks
associated with leaving extremely expansionary policies in place for too long. Such policies, if
not removed, are likely to cause significant economic imbalances and asset mispricing,
making markets excessively vulnerable to damaging corrections and leaving economies with
limited ability to cope with future shocks. This would not be the first time that policy has been
too easy: in the 1970s, and again in the past decade, easy monetary policies left in place for
too long led first to market instability and then to economic volatility. This time, the situation is
exacerbated by overextended fiscal policies.
Chapter 2
Navigating the new EM landscape: Where to find the best returns
29
In the six years since this series last took up emerging markets, much has changed. Global
influence has moved from the slow-growing G7 to booming China, contributing to EM
growth outperformance. EM also weathered the 2008 credit crisis remarkably well, despite
some initial scepticism, due predominantly to robust policy frameworks tempered in earlier
booms and busts. We think investors should expect EM economies to deliver higher growth
and lower volatility than in the past, improving economic Sharpe ratios relative to the
lagging G4. Although EM growth outperformance is part of the received market wisdom,
we think it is not fully priced in to todays equity markets. We forecast EM equity market
returns of more than 10% (in USD, adjusted for US inflation), in line with the past decades
strong performance.
Chapter 3
A return to scarcity: The disinflation trend is over
52
Over the past decades, globalization has brought sleeping giants to the global goods and
labor market. This, coupled with technological advances in commodity production, helped
generate disinflationary pressures globally. However, the impressive growth of China and
India is increasing demand for commodities at a rapid pace, making it difficult for
technological advances to allow production to catch up with demand. This is creating
inflationary pressures on commodity prices, making them more vulnerable to shocks and,
hence, more volatile. In turn, policymakers face deeper challenges, as central banks of
commodity-importing countries have to fight these imported inflationary pressures and
respond to more volatile price fluctuations.
Chapter 4
Simple strategies for extraordinary times
72
The past decade has been a rollercoaster ride for investors. In the past 12 months alone,
investors have been buffeted by deficit concerns in Europe, deflationary fears in the US, and,
most recently, expectations of rising inflationary pressures. Furthermore, the response from
policymakers has been unprecedented, with central banks embarking on a mission to ease
monetary policy via quantitative easing and governments under pressure to tighten fiscal
policy and tackle growing deficits once and for all. We present simple strategies to help
navigate the volatile waters of today's investment environment: by extending the humble
diversification process and focusing on riskrather than return-based allocation strategies,
we believe investors can protect portfolio returns without worrying about forecasting future
returns or timing the next big correction.
10 February 2011
Chapter 5
Dismal demographics and asset returns revisited
78
The 2005 edition of the Equity Gilt Study contended that demographics are a powerful
driver of medium- to long-term trends in bond and equity markets. In this edition, we reexamine the issue of demographics and asset returns more formally in order to address
criticisms of past attempts at quantifying potential linkages between them. We find that
demographics matter, though perhaps not quite as much as our earlier work had
suggested. Accordingly, our original findings that demographics would reduce both stock
and bond returns over the medium- to long-term remain unchanged, and we still expect
equities to outperform bonds over the next decade. However, we now conclude that the
equity risk premium may be 1% lower than the historical average, whereas we formerly
reckoned that it would be 1% higher.
Chapter 6
UK asset returns since 1899
92
This chapter presents the real returns of the major asset classes in the UK. Financial markets
faced a volatile year in 2010, yet equities managed to end the year in positive territory. The
FTSE all share price index had fallen 12% year-to-date by July, but managed to rally 23% for
the remainder of the year. Equities were the worst performing asset over the decade,
producing a meagre inflation-adjusted return of just 0.6%, although this is a marginal
improvement over the negative 10-year returns produced over the past two years. Gilts
continued to outperform equities over the 10-year horizon and the annual performance in
2010 was a marked improvement from the negative returns during 2009.
Chapter 7
US asset returns
97
This is the 11th year in which we have incorporated US asset return data. US asset returns
followed a similar trend to those of the UK. Equities were the best performing asset, despite
periods of intense volatility. US equities followed European stocks lower as the sovereign
debt crisis unravelled in the spring. The turbulence continued into the summer as weaker
domestic economic data triggered fears of a deflationary spiral back into recession.
Treasuries and TIPS performed well, as the flight-to-quality trend dominated during the
spring and summer months. The Feds announcement of a second round of quantitative
easing helped fuel a recovery in global equities into year-end. Over the decade, equities
underperformed all assets aside from cash.
Chapter 8
Barclays indices
101
We have calculated three indices: changes in the capital value of each asset class; changes
to income from these investments; and a combined measure of the overall return, on the
assumption that all income is reinvested.
Chapter 9
Total investment returns
125
Our final chapter presents a series of tables showing the performance of equity and fixedinterest investments over any period of years since December 1899.
10 February 2011
CHAPTER 1
Easy policies today, rude awakening tomorrow

Extraordinarily expansionary policies played a critical role in pulling the world out of the
financial crisis and severe recession of 2008-09. However, there are significant risks
associated with leaving extremely expansionary policies in place for too long. Such
policies, if not removed, are likely to cause significant economic imbalances and asset
mispricing, making markets excessively vulnerable to damaging corrections and leaving
economies with limited ability to cope with future shocks. This would not be the first time
that policy has been too easy: in the 1970s, and again in the past decade, easy monetary
policies left in place for too long led first to market instability and then to economic
volatility. This time, the situation is exacerbated by overextended fiscal policies.
Piero Ghezzi
+44 (0) 20 3134 2190
piero.ghezzi@barcap.com
Christian Keller
+44 (0) 20 7773 2031
christian.keller@barcap.com
Luca Ricci
+1 212 526 9039
luca.ricci@barcap.com
The global easing and its aftermath
Tal Shapsa
+1 212 526 3724
Most of the world responded with very loose fiscal and monetary policy following the
biggest global recession since the Great Depression. Many of the largest and systemically
more important emerging markets were able to join the countercyclical policies as well in
contrast to past crises, when EM economies typically had to tighten policies, thus
exacerbating their own cycles.
tal.shapsa@barcap.com
The fight to avoid a Great
Depression united policymakers
Extremely easy conditions clearly succeeded in averting a depression-like period and

causing the global economy to bounce back rapidly (Figure 1). However, behavior has not
been symmetric: as growth has resumed, countries have been significantly slower to
withdraw stimulus than they were to implement it. Many policymakers appear to be
particularly focused on short-term economic outcomes at the cost of potential deterioration
of medium-term fundamentals. There is certainly much lower tolerance for slow economic
growth, low employment, and deflationary risks, and much more tolerance for the risk of
high inflation than most observers would have anticipated not too long ago.
resulting in massive policy

easing globally
and a postponement of
concerns about inflation and
fiscal sustainability
The clearest example is the US, where fiscal and monetary policies and overall lending
standards are currently more expansionary than they have ever been, adjusted for the level of
growth and inflation. The federal funds rate is well below where a Taylor rule based on
Barclays Capital estimates would suggest (Figure 2), especially when accounting for the
implicit interest rate effect from quantitative easing (QE). A similar differential arose in the
early to mid-2000s and was eventually associated with the emergence of a housing and credit
bubble. In parallel, the budget deficit surged to levels not seen since the Second World War.
US extreme policy easing

stands out
Figure 1: Global recovery was V-shaped

13
BRIC GDP (% y/y)
11
Global GDP (% y/y)
Figure 2: because the policy response was massive

%
Diff b/w the Fed funds rate and BarCap

Taylor rule estimates
US fiscal balance % of GDP, rhs
5
3
9
1
0
-1
-3
-2
-5
-7
-4
-1
-9
-3
92
94
96
98
00
Source: Datastream, Barclays Capital
10 February 2011
02
04
06
08
10
-6
Q1 00
-11
Q1 02
Q1 04
Q1 06
Q1 08
Q1 10
Note: The Fed funds rate is adjusted for the estimated effect of QE.
Source: Haver, Barclays Capital
Europe has its own set of issues:

the periphery debt crisis and
banking system concerns
The UK stands out in its fiscal

adjustment effort
while Japan has a

flat policy stance
EM economies are maintaining

policies too loose for their
cyclical position
Past experience and

ongoing deflation fears
may explain the hesitation
to withdraw stimulus
but leaving policies loose for

too long raises the risk of
inflation, debt defaults and
asset bubbles
Two bubble candidates:

EM and commodities
European policies have generally been less expansionary than in the US. This is in part
because of a somewhat more patient approach to policymaking; but it also reflects the
ECBs narrower mandate (unlike the US Fed, it does not include a reference to employment)
and larger built-in automatic fiscal stabilizers (for example, unemployment schemes), which
reduce the need for discretionary policies. However, Europe has its own problems. The
challenging debt dynamics in peripheral Europe require unprecedented fiscal adjustments.
Failure could make debt restructurings necessary within the next few years. Similarly, an
uneven economic recovery highlights the limitations of a one size fits all monetary policy,
increasing inflationary risks as the ECB is constrained by problems facing the periphery.
The UK is as an exception within the G7: it has begun to reverse its fiscal course
determinedly with a strong plan for consolidation. The UK also resisted the idea of QE2;
nevertheless, recent higher-than-expected headline inflation prints have raised concerns
that monetary policy may not be sufficiently in control of price developments. Japan looks
relatively stable in its policy stance: on the one hand, its engagement in quantitative easing
remained minimal in the fall of 2010 (but it has had a zero interest rate policy for some
time); on the other hand, it plans to reduce its large fiscal deficits only very gradually. On a
broad aggregate it seems fair to say that most advanced economies will likely experience
bloated public finances compared with recent historical standard and very loose
monetary policy for quite some time.
Emerging market economies are also running fiscal and monetary policies that seem too
loose for the current high levels of growth and accelerating inflation. These pressures are
exacerbated by the financial spillovers from advanced economies accommodative
monetary policies, possibly leading again to goods and asset price inflation if not brought
under control. Efforts to limit inflationary pressures have generally been timid, in particular
because of the widespread reluctance to allow further currency appreciation a likely
outcome if domestic interest rates are raised in a world where G3 policy rates are close to
zero. EM governments have started to experiment with administrative measures to control
price developments and used FX intervention and macro-prudential measures (including
capital controls) to find a way out of their dilemma. However, these are unlikely to be
sustainable solutions if the underlying fundamental pressures persist.
There are valid grounds for hesitating to withdraw global stimulus. The recovery among
advanced economies thus far has remained weaker than would have been expected based on
past recoveries. Moreover, the experiences of Japan in recent decades and the Great
Depression of the 1930s are a reminder of the costs associated with tightening policies
prematurely. Moreover, cyclical unemployment that lasts too long can become structural if
workers start to lose their skills. Continued easy policy in advanced economies can thus be
justified as significantly reducing the important tail risk of deflation and/or depression. This is
what QE2 seems to have done in the US.
However, we believe the costs of super-easy policy may outweigh their benefits. First,
current fiscal and monetary policies are not only extremely accommodative, but there is
also a generalized perception that they will remain so in the immediate (and not so
immediate) future. This significantly increases the risk of bubbles in certain asset prices as
investors become too self-assured: they extrapolate recent past performance into the future
and, ex post, justify bubbly valuations by ascribing them to improved fundamentals. As
Rajan (2010) 1 has mentioned, there are good reasons to believe that the Feds policy of
targeting unrealistic unemployment objectives prior to 2007 fuelled the housing bubble.
Emerging markets and commodities are two clear bubble candidates. There are strong
reasons to justify the tighter valuations of these two asset classes (see Chapter 2, Navigating
the new EM landscape: Where to find the best returns and Chapter 3, A return to scarcity:
The disinflation trend is over). However, in this easy policy environment, investors may get
1
10 February 2011
Rajan , Raghuram G., Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press 2010.
carried away, leading prices to surge well beyond what the underlying growth prospects or
global demand-supply shifts would warrant. In turn, this could have negative feedback effects
on growth (as a result of higher commodity prices, including oil) and, overall, would almost
certainly create a global environment of elevated volatility.
Risk of exacerbated cycles and
higher volatility
Some tightening today could

prevent more aggressive
actions later
Policy toolkits in EM and

advanced economies may not
be appropriate
Risks of undue delays in policy

adjustments are real
Second, the serious deterioration in medium-term fundamentals, in particular the

worsening of fiscal dynamics in advanced economies and the possible loss of inflation
credibility across the world, have made many economies vulnerable to sudden shifts in
investor sentiment (as the recent peripheral European debt problems attest). Many
policymakers in developed economies (particularly in Japan and the US) are acting as if the
chances of a switch in market sentiment are nil. The recent reduction of Japans long-term
sovereign credit rating from Standard & Poors suggests that such perception may not be
correct. Not only are countries more vulnerable, but worsening fundamentals also limit their
ability to undertake counter-cyclical policies in case of negative sentiment shifts. This would
most likely result in future policy-exacerbated cycles.
Third, some tightening (if moderate) would be unlikely to derail the economy as it would
still leave the world with very accommodative policy. Even if central banks around the world
were to start hiking policy rates and fiscal spending was cut, policies would still be relatively
loose. And some tightening today would likely reduce the probability of much more
aggressive tightening down the road.
Fourth, there may be a problem with the policy toolkit. EM countries that hesitate to raise
interest rates more aggressively and/or intervene in the exchange rate out of at times
justified fears of FX overshooting, often seem unwilling to accept that such measures also
need to be complemented by tighter fiscal policies to reduce inflationary pressures.
Likewise, policymakers in advanced economies seem to be unwilling to accept that some of
the structural problems facing their economies require more targeted measures than simply
a loose monetary and/or fiscal stance.
Concerns about this apparent short-sightedness do not strike us as overdone. From a
political economy perspective, politicians are likely to find it much easier to increase
spending even more so if they are given the green light by the international community
than to rein in budget deficits. But also from an academic perspective, the answers in this
post-crisis stage seem less clear-cut than they appeared when the crisis broke out. The
abundant studies of the Great Depression and Japans crisis of the 1990s state clearly what
not to do (policy tightening in response to crisis, trade wars) and what to do (determined
loosening of fiscal and monetary policies, saving the banking system). However, the
literature on how best to exit from such anti-depression policies after they have been
implemented is less developed. Against this backdrop, leaving aggressive expansionary
polices in place may appear as the most palatable choice for many policymakers.
Yet, in our view, the opposite of this attitude is needed: facing a potentially unstable
environment, policymakers need to become more forward-looking and more averse to the
risks emanating from loose policies. An immediate effort to regain sustainability in
advanced economies is vital. Central bankers must not exacerbate instability by remaining
behind the curve and failing to withdraw extreme stimulus that threatens to generate goods
and assets inflation. In EM, this means more aggressive tightening. In several major
advanced economies, it means that central banks will need to shift to tightening within
months, not years.
10 February 2011
Fiscal challenges in advanced economies

Government debt paths in a
number of advanced economies
could become explosive
Government gross debt-to-GDP ratios in most developed countries have been increasing
consistently over the past decade, reaching, on average, just below 60% on the eve of the crisis
(end-2007). GDP contractions and large fiscal deficits as a result of the global crisis, and the
ensuing policy response, caused the average ratio to jump to 75% by end-2009; the IMF
forecasts a further increase to 85% by end-2015. 2 In many advanced economies, government
debt dynamics have become alarming, even when measured on a net basis (Figure 3 and
Figure 4). For example, the Congressional Budget Offices (CBO) June 2010 Long-Term Budget
Outlook presents a scenario in which, under tax cuts smaller than those recently approved,
adding demographics-related expenditure and leaving all other policies unchanged, US debt
would rise to almost 950% of GDP by 2084. 3 Similarly, the EU in 2009 prepared a joint longterm sustainability analysis for 27 countries, according to which unchanged policies would lead
20 out of the 27 EU countries to have (clearly unfeasible) debt ratios above 300% by 2060. 4
Necessary fiscal adjustments are massive

Large primary fiscal balance
adjustments are needed in the
coming years just to stabilize
debt ratios
The US and Japan stand out in

terms of their adjustment needs
The fiscal adjustments needed in the main advanced economies in the coming years are
massive. In Figure 5, we estimate the primary (ie, excluding interest payments) fiscal balance
adjustments between now and 2015 that a number of advanced economies will need to make
to stabilize their debt-to-GDP ratios. 5 Our calculations are based on the countries underlying
primary balances, netting out cyclical factors and one-off capital expenses. We then add the
expected increase in aging-related expenditures from 2010 until 2060 (mainly pension, health
care, and long-term care) to obtain the total primary fiscal balance adjustment needed.
The US and Japan stand out among the largest economies in need of adjustments. Based on
our calculations, the US will need to improve the structural primary balance by 8.4% of GDP
between 2010 and 2015. On the same basis, Japans effort will need to amount to 7.8% of
GDP. Among the other G7 economies, the UK has the largest adjustment need (5.9%),
followed by France (4.1%) and Germany (2.1%), which faces heavy aging-related liabilities
but starts from a very low structural deficit. Italy is in a better position because it had run
primary surpluses before the crisis, implemented only a moderate fiscal stimulus during the
crisis, and had undertaken major pension reforms over the past decade.
Figure 3: Gross public debt has been trailing higher

%
Gross public debt % of GDP
250
200
Figure 4: as has net debt

%
Net public debt % of GDP
150
United States
United Kingdom
France
Japan
Germany
Italy
130
110
United States
United Kingdom
France
Japan
Germany
Italy
90
150
70
100
50
30
50
10
0
1980 1984 1988 1992 1996 2000 2004 2008 2012
Source: OECD, Haver, Barclays Capital
-10
1980 1984 1988 1992 1996 2000 2004 2008 2012
Source: OECD, Haver, Barclays Capital
IMF Staff position note, September 2010, SPN/10/11: Fiscal Space Ostry, Ghosh, Kim, Qureshi.
http://www.cbo.gov/doc.cfm?index=11579, alternative scenario.
4
http://ec.europa.eu/economy_finance/publications/publication15998_en.pdf
5
We calculate the adjustment required by 2015, assuming it takes place gradually over the next five years. Assumptions
related to growth, interest rates, and demographic-related expenditures over the 2010-2060 horizon are mainly based on
information from national authorities and the EU. Details available upon request.
3
10 February 2011
Figure 5: Required fiscal adjustment in selected advanced economies

Required
Required
Additional
Barclays forecast
primary
adjustment adjustment due
for primary
Net
Underlying
Total required
debt/GDP
primary
balance in
from 2010-15 to demographic- Total required
primary
balance
adjustment
in 2010
balance in
2015 to
to stabilize
related
balance in improvement from
(OECD) 2010 (OECD) stabilize debt
debt
expenditures from 2010-15
2015
2010 to 2011
Belgium
82.4
1.3
0.8
-0.5
1.1
0.6
2.0
0.1
France
57.1
-3.2
0.6
3.8
0.4
4.2
1.0
1.6
Germany
50.5
-0.7
0.5
1.2
0.9
2.1
1.4
1.3
Greece
97.3
-0.3
1.0
1.3
1.2
2.5
2.2
2.3
Ireland
61.5
-5.5
1.1
6.6
1.0
7.6
2.1
2.6
Italy
103.3
2.0
1.5
-0.5
0.3
-0.1
1.9
0.3
Japan
114.0
-5.5
1.2
6.7
1.0
7.8
2.2
0.8
Spain
43.4
-4.7
0.5
5.2
0.9
6.1
1.4
3.2
UK
51.3
-5.0
0.3
5.3
0.6
5.9
0.9
2.0
US
67.8
-7.0
0.4
7.4
1.0
8.4
1.4
1.1
Source: EU, Haver, OECD, Barclays Capital
Figure 6: Our assumptions on interest-growth differential compared to historical estimates

Interest rate growth differential
BarCap assumptions
1998-2007 average
Belgium
1.2
1.5
France
0.8
Germany
2.6
Greece
-1.5
1.5
Ireland
-5.8
1.5
Italy
1.4
1.5
Japan
Spain
-2.4
1.5
UK
0.4
0.5
US
0.3
0.5
Note: 1998-2007 average is based on the implied interest rate on public debt, taken from Table 2 from the IMF Staff
Position Note: Fiscal Space, 1 September 2010. Source: IMF WEO, Barclays Capital
Future growth and interest rates likely to be worse than in the past
Debt sustainability scenarios do
not appear unduly pessimistic
The interest rate-growth

differential in the past decade
was favorable
A crucial input in our calculation is the differential between the interest paid on debt and
countries nominal growth rates. Roughly speaking, when assessing the evolution of the
debt-to-GDP ratio, the nominal interest rate is a key input on how fast the numerator grows
and nominal growth determines how fast the denominator grows 6. We have used what we
consider to be relatively conservative assumptions in our exercise. 7 In particular, the
benchmark calculations use a gap between interest and growth rates ranging from 0.5% for
the UK and the US, to 1.5% for most other countries.
These numbers are not far away from those prevailing in the decade before the crisis,
except for those countries where adoption of the euro had created the unusually benign
situation of significantly negative interest rate-growth differentials on the back of sharp
interest rate reductions and increases in growth. However, even for the other countries,
several factors suggest higher interest rates and lower growth forward in the future.
6
The primary balance plus other debt-creating items not included in fiscal account are other key determinants of nominal
debt growth.
7
The use of net debt (as opposed to gross debt) is likely to be quite appropriate, especially in countries with significant
asset positions like Japan. In practice, however, not all government assets can be easily liquidated. Also, we neglect
demographic related expenditures beyond 2060: given the small gap between interest rate and growth, considering fiscal
burden beyond this horizon would significantly increase the required primary balance (this explains why our calculation
are generally below the ones prepared by the EU in 2009).
10 February 2011
Interest rates could be higher
Interest rates could be driven higher in advanced economies, simply because elevated debt
levels push investors to charge a higher risk premium. In addition, longer-term shifts in
global investment and saving patterns, driven by demographics and developments in EM
economies, are likely to increase real interest rates worldwide (see Chapters 2 and 3). 8
Growth could be lower
Similarly, a number of factors are likely to weigh on growth in advanced economies. First,
the enormous fiscal consolidation effort needed will weigh on near-term growth. The IMF
estimates that a fiscal consolidation effort of 1% reduces GDP by 0.5% within two years
and raises unemployment by 0.3 pp. Over the longer term, however, debt reduction is likely
to be beneficial to growth. 9 Second, these economies are shrinking some of the sectors that
were the fastest growing in pre-crisis times, such as finance, retail and, in some cases,
construction. While the re-allocation of resources into different sectors takes place, growth
is likely to be lower. Third, not only is population growth slowing, but the growth of the
labor force is slowing even more or even entering negative territory; indeed in many
advanced countries it is projected to decline (for more details, see Appendix 1: Long-term
growth prospects).
Larger interest rate-growth
A combination of higher interest rates and lower growth could significantly worsen debt
dynamics. For example, a 100bp increase in the gap would raise the total required primary
balance adjustment since 2010 by 1-2 percentage points of GDP (Figure 7).
differentials imply a larger fiscal

adjustment need
Fiscal tightening to the rescue?

Large debt reductions in the past
were often driven by high
growth, and fiscal tightening
tended to be expenditure-based
Past debt reductions offer some lessons. First, large debt reductions were generally aided by
large nominal GDP growth (Figure 8). Second, fiscal adjustments that relied on expenditure
cuts tended to be more successful than tax-based adjustments. Third, most of the successful
expenditure-based adjustments relied on cutting transfers, social benefits, subsidies and
wages. And fourth, front-loaded adjustments helped restore credibility where needed.
Figure 7: Additional fiscal adjustment*: higher interest rates

(or lower growth) by 100bp
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Figure 8: Large debt reduction assisted by high growth
Debt reduction level 10Y after debt peak

80
60
USA
BEL
SEK NLD
CAD
DKK
AUS
FIN
ITA
USA
40
20
US
UK
Spain
Japan
Italy
Ireland
Greece
Germany
France
Belgium
to stabilize debt
GER
-20
Note: * Additional fiscal adjustments required relative to Figure 5.

Source: EU, Haver, OECD, Barclays Capital, authors calculations
SPA
FRA
JPY
-40
2
due to demographic-related expenditures
IRL
4
6
8
10
Average nominal growth (%) in the 10Y after peak
12
Source: EU, Haver, OECD, Barclays Capital, authors calculations. Note: The peak
years are: US: 1993, 1946; France: 1998, 1921 (for both the earlier peak year is
represented by the higher dot), Ireland: 1991; Australia: 1995; Spain: 1996;
Sweden: 1996; Netherlands: 1993; Denmark: 1993; Finland: 1996; Canada: 1996;
Belgium: 1993; Italy: 1998; Germany: 1998; Japan: 1987.
Source: IMF, OECD, Barclays Capital
For example, large EM economies such as China and India reduce their aggregate savings in order to finance high
investment expenditure, contributing to higher global interest rates. See for example a recent McKinsey report:
http://www.mckinsey.com/mgi/publications/farewell_cheap_capital/pdfs/MGI_Farewell_to_cheap_capital_full_report.pdf
9
See, World Economic Outlook, IMF October 2010.
10 February 2011
Given that high growth is unlikely to make the contribution to debt reduction that it did in the
past, fiscal consolidation will have to play a much more prominent role. The exact composition
will depend on country-specific circumstances. Consistent with historical evidence, countries
that start with low expenditure levels may also need to rely on tax increases (Figure 9).
Future adjustment will

require fiscal focus, including
on revenues
The UKs fiscal consolidation plan seems to fit textbook advice. The adjustment planned
over the next five years should bring both revenues and expenditure to about 40% of GDP
close to the UK historical average. This should offset the main source of the deterioration in
the fiscal balance over the pre-crisis period (from 0.7% in 2001 to -2.8% of GDP in 2007,
according to the OECD), which was an increase in expenditure (from 40% to 44% of GDP).
To boost confidence, the adjustment is also relatively front-loaded: the bulk of the
adjustment occurs in 2011-12, when monetary policy is expected to remain
accommodative. The authorities expect the fiscal consolidation plan to bring the primary
balance to 1.8% of GDP by 2015-16, which will be sufficient, according to both our and the
authorities calculations, to place debt-to-GDP ratios on a declining path. A strong and
frontloaded fiscal consolidation surely helped avoid any possible association of UK public
finances with those of peripheral Europe. However, the position of the economy in the cycle
(recovery still on its way but high inflation) may have warranted a more balanced policy
mix, rather than a very tight fiscal policy and a very loose monetary policy
The UK fiscal adjustment seems

timely and balanced
In the US, the fiscal deterioration in the years prior to the crisis stemmed not only from an
increase in expenditures (mainly in health and military spending, which both grew by about
1% of GDP between 2000 and 2007), but also from a decline in revenues associated with
tax cuts (which has been estimated at about 1.7% of GDP). 10 However, room for
manoeuvre is limited, as federal revenues and primary expenditures (both at 18.5% of GDP
in 2007, according to the CBO) are less than two-thirds of national levels (respectively,
33.9% and 34.9% of GDP in 2007, according to the OECD). The difference is mainly
accounted for by state and local authorities, which are required to balance their budgets
every year, and hence are unlikely to contribute to the fiscal adjustment. If anything, they
could add to the countrys overall fiscal burden as they are lagging in setting aside savings
to cope with future pension and health liabilities (the net present value of the gap between
assets and liabilities for state authorities has been estimated at about $1trn for 2008 11).
The US has limited room

to maneuver
Figure 9: Expenditure adjustment after high expenditure
Figure 10: Effective Fed funds vs optimal (Taylor rule) level
Diff. b/w expenditure and revenues adj (% GDP)
10
15
NLD
10
BEL
FIN
NZL
AUD
USD
0
CHF
IRL
CAD
SPA GBP
GER
ISK
LUX
ISK
JPY
GRC
POR
-5
-10
8
SEK
AUS
DKK
DKK
SEK
2
ITA
-15
-2
Q188
-20
30
40
50
60
70
80
Initial expenditure % of GDP

Note: The calculations for the chart are based on columns 3 and 4 of Table 5.a
from: "Strategies for Fiscal Consolidation in the Post-Crisis World" by the IMF
(see: http://www.imf.org/external/np/pp/eng/2010/020410a.pdf) and OECD
fiscal data for expenditures. For every given consolidation episode, the gap
between the expenditure reduction and the revenue increase was plotted against
the expenditure-to-GDP ratio in the starting year of the consolidation.
Source: IMF, Barclays Capital
Q191
Q194
Q197
Q100
Fed funds accounting for QE
Q103
Q106
Q109
BarCap Taylor rule
10
See Table 2 in Tempalski (2006) Revenue Effects of Major Tax Bills US Office of Tax Analysis Working Paper No. 81,
http://treas.tpaq.treasury.gov/offices/tax-policy/library/ota81.pdf
11
See report from the PEW center http://downloads.pewcenteronthestates.org/The_Trillion_Dollar_Gap_final.pdf
10 February 2011
10
Reforms in the US will need to

focus on health and social
security expenditures
Considering the demographic changes and existing spending patterns on old age, it seems
that much of the adjustment will eventually come from pension and health care reform.
Health and social security expenditures account for almost half of federal primary
expenditures (at 8.7% of GDP in 2007). The main emphasis will need to be on health
reforms, which are particularly unsustainable in light of the likely demographic pattern
(CBO projections show health expenditures doubling from their 2007 level of 4.5% of GDP
by 2028 and tripling by 2050, while social security outlays should grow from 4.2% to 5.8%
by 2028 and then remain reasonably stable).
However, such reforms are unlikely to be enough. Even if health and pension expenditures
can be kept constant at the average 2002-07 level (8.3% of GDP), the projected federal
primary balance in 2015 will go from -3.2% to -0.7% of GDP (on the basis of CBO
projections for other budgetary items), hence about 2.3% of GDP lower than the target we
suggested in Figure 5. 12 Therefore, it seems likely that an increase in taxes, or possibly a
reduction in other expenditures, will also be needed.
Japans adjustment so far has

not been ambitious
as funding risks still

appear limited
Additional measures will

likely have to include
pension entitlements
but may have to be more

revenue-based than elsewhere
Fiscal adjustment will require

health and pension reforms that
are difficult to implement with
an aging median voter
Japan implemented relatively large fiscal stimuli, estimated at 2.8% and 2.2% of GDP in 2009
and 2010, respectively; even for 2011, about 1% of GDP stimulus is expected. This has driven
the fiscal deficit to more than 10% of GDP in 2009 and it was still at 9.5% in 2010. So far,
efforts to reduce these deficits seem modest. We project the headline deficit to decline
gradually to 7.5% of GDP by 2012. This mainly reflects the expiration of the stimulus, which
generates savings of 1.5-2.0% of GDP, and implies further increases in the debt-to-GDP ratio.
So far, the governments near-term funding risks have been reduced by the large share of
public debt held domestically (95%), which is itself a reflection of large household savings
and current account surpluses. However, the markets capacity to continue to absorb the
necessary net issuance of government bonds is likely to diminish gradually as an aging
population reduces its saving. Notably, Standard & Poors recently downgraded Japans
long-term sovereign credit rating from AA to AA-.
As a result, Japan will likely have to do more fiscal adjustment soon. The IMF estimates that
containing public spending growth and reforming pension entitlements in line with rising
life expectancy could generate additional savings of around 3-4% of GDP over the next
decade. However, in general, the scope for expenditure reductions in Japan is more limited
than in other advanced economies, given that general government expenditure (including
social security) was already only 33% of GDP in 2007 (pre-crisis), the lowest among G7
economies with the exception of the US. At the same time, Japans overall tax revenue of
18% is small by international standards, suggesting the need for a more revenue-based
adjustment. Given the distinct tax structure a consumption tax rate of 5% but a corporate
tax rate of 40% this may have to be combined with relative adjustments between the
different tax rates, in particular an increase in consumption taxes.
Overall, the most advanced economies in particular the two largest, the US and Japan
face daunting debt dynamics. With real growth likely lower than in the past decade and
future interest rates higher, debt stabilization would have to rely on primary balance
adjustments. Health care and pension reform will have to play an important role in the
adjustments in coming years. However, at the same time, such changes are the most
difficult to implement by governments in democracies where the median voter is aging.
12
The primary balance in the January 2011 CBO alternative scenario is about -3.2% of GDP (see
http://www.cbo.gov/doc.cfm?index=12039 ). The health and pension calculation are based on the August 2010 revision
of the CBO outlook, Figure A1.
10 February 2011
11
Easy money and inflation

Could inflation be used by public
policymakers to cope with an
increasing real debt burden?
Large fiscal deficits in advanced economies have been accompanied by loose monetary
policy, particularly by the Fed. Expansionary monetary policy by itself raises concerns about
future inflationary developments, but there is an added twist given the backdrop of the
rising public debt ratios: could inflation be used by public policymakers to cope with a rising
real debt burden? On the one hand, this could make central bankers pledge to maintain
price stability less credible. On the other hand, it raises the question of how successful a
strategy to use inflation as a means to deal with the debt burden could actually be.
Potential inflation surprises, expectations, and central bank credibility

Deflation fears and high
unemployment led to the
extensive monetary loosening
since 2008
Policy might be too easy already,

as demonstrated by the gap
between the effective Fed funds
rate and the optimal level
US disinflation has reached

a trough
The risk of deflation, coupled with high unemployment, has been the threat that has led to
the radical monetary loosening since 2008. Indeed, monetary policy errors pro-cyclical
policies and/or the premature reversal of accommodative monetary policies are typically
blamed for the seriousness of the Great Depression and also the languishing of the Japanese
economy. However, the longer expansionary policies remain in place, the higher the risk of
potential upside surprises on inflation. In other words, the marginal reduction of the
deflation risk is paid for with an additional risk of higher-than-expected inflation.
But is monetary policy already too easy? We start with the prime candidate, the US, where
monetary policy has been most aggressive. Figure 10 shows the effective Fed funds (adjusted
by the effects of QE) and the optimal Taylor-rule-implied level (given current levels of US
unemployment, output gap, and inflation). The current gap is almost 2% and this does not
consider the fact that fiscal policy is extremely expansionary. Our Taylor rule calculations are
affected by our estimates that the natural rate of unemployment has recently risen to 7%
(Figure 11), significantly above the January 2011 CBO estimate of 5.2%. The reasons why
NAIRU may have increased mostly relate to the fact that higher (particularly long-term)
unemployment in manufacturing and construction will prove to be structural (Figure 12). 13
But our view is not related solely to a smaller output gap. Much of the disinflation in the US
has been related to shelter costs, which appear to have troughed (Figure 13 and Figure 14).
In addition, the evidence suggests that many components of core inflation are unrelated to
the output gap and that for those goods whose inflation is affected by the output gap, it is
not only the level, but also the direction, of the output gap that matters.
Figure 12: Labor force participation rate
Figure 11: Unemployment and the NAIRU

% labor force
11
% population
68
67
66
7
65
5
3
Q163
64
Actual Labor Force Participation

Fixed 2000 participation rates
63
Q170
Q177
Q184
Q191
Q198
Q105
with Census population forecasts

62
Unemployment rate
BarCap NAIRU estimate
Source: BLS, Haver, Barclays Capital
90
95
00
05
10
15
20
Source: BLS, Census Bureau, Haver, Barclays Capital
13
Please see Beyond the cycle: Weaker growth, higher unemployment, 15 December 2010 and Hires and Fires: accounting
for the rise in Nairu, 21 January 2011).
10 February 2011
12
Figure 13: Core disinflation has been focused on shelter

y/y % chg
5
CPI shelter
CPI ex-food, shelter, and energy
Figure 14: CPI shelter costs are rising

3m % chg, saar
CPI owners' equivalent rent
CPI rent of primary residence
3
2
-1
-1
00
02
04
06
08
10
05
06
07
08
09
Source: BLS, Haver Analytics
Source: BLS, Haver Analytics
Figure 15: US M2 (% GDP)
Figure 16: Fed balance sheet projection ($bn)
65
3500
no reinvestment
unitary elasticity to GDP from 2008
60
3000
50% reinvestment of TSY only
10
2500
55
2000
50
1500
45
1000
40
1995
500
1997
1999
2001
actual
2003
2005
2007
2009
converging to historical average
The expansion of monetary

aggregates corroborates
extremely easy policy
Other measures also

suggest that credit
constraints are no longer an
aggregate phenomenon
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
The expansion of monetary aggregates corroborates extremely easy policy: the ratio of M2 to
US GDP in 2009 was at its highest in two decades, about 60%, compared with the pre-crisis
mean of 50% during 1994-2007 (Figure 15). The Fed accumulated about $2.5trn of assets on
its balance sheet and is set to accumulate a few hundred billions more until June. Even if the
Fed subsequently stopped implementing additional quantitative easing, it is unlikely to dispose
of its assets quickly. Certainly, the normal amortizations will allow the Fed to run down its
balance sheet over time, but such a gradual reduction may not be fast enough if a monetary
contraction is needed soon. Indeed, even in the absence of reinvestment of maturing assets,
the Feds balance sheet may remain very high with respect to historical ratios to GDP (about
7.5% over the 1994-2007 period) for several years to come (Figure 16) 14. If credit starts to
pick up, the increase in the bank multiplier compounds the increase in the money base,
possibly creating inflationary pressures more rapidly than is currently anticipated.
Other measures also suggest super-loose liquidity. US banks are maintaining very large excess
reserves, on the order of USD 1trn (Figure 17). This partly reflects the mechanics of Fed QE
interventions and the fact that it recently started paying interest on reserves; it does not
necessarily imply the ineffectiveness of targeted interventions during the first round of QE.
14
The FED balance sheet projections with no reinvestment assume the FED continues to pursue QE2 until June 2011 and
then let treasuries, MBS, and agency asset expire at their maturity. The FED balance sheet projections with partial
reinvestment assumes that after June 2011 the FED reinvests 50% of Treasuries at their expiration (no reinvestment for
MBS and agency assets).
10 February 2011
13
However, banks could increase lending as a result of the elevated level of reserves, once
adequate lending opportunities arise. In addition, corporates are awash with cash and are able
to find funding by tapping the bond market (Figure 18 and Figure 19). Overall, this suggests
that credit constraints are no longer an aggregate phenomenon.
The crucial question is how confident the Fed can be that it will be able to withdraw such
volumes of liquidity quickly when the demand for credit picks up. Bernanke says: 100%.
However, the sheer size of the potential lending that could result from the elevated level of
bank reserves implies that keeping credit growth in check could require large, and fast, interest
rate hikes. At the same time, central banks, trying to prevent stop-and-go patterns, have good
reason to prefer more gradual rate policies. In other words, this latent liquidity in the system
will require the Fed to be more timely (and possibly more forward-looking) than in the past.
Latent liquidity in the system will

require the Fed to plan ahead, as
quick withdrawal is tricky
Although the US may be the most exposed, the inflation credibility issue is also relevant in the
UK and the euro area. Monetary policy conditions have been kept loose in the euro area,
where the ECB has provided unlimited access to cheap liquidity for banks through its nonstandard liquidity operations, and policy interest rates have been kept at historic lows.
Moreover, reflecting excessive liquidity in the interbank market, the EONIA overnight interest
rate was fixed substantially below the ECB policy rate throughout last year, although it has
normalized lately. Lingering uncertainty about the outlook for euro area liquidity conditions,
coupled with more hawkish ECB rhetoric in light of rising inflationary pressures, is likely to
keep short-end rates elevated relative to last year. We estimate that this adjustment alone, if
maintained, would be the equivalent of a rate increase of about 50bp.
Inflation credibility is also

relevant in the UK and euro
area, where excessive
liquidity continues
Nevertheless, we believe the ECB still faces pressures to raise interest rates. Monetary data
suggest that private sector credit growth and M3 growth have bounced from the lows in
the early spring of last year, implying that credit constraints should ease. Moreover, price
pressures have been building as a result of commodity price dynamics, but also increasingly
because of domestic core goods prices. In addition, as the economic recovery in the euro
area has been uneven across member countries, the one-size-fits-all monetary policy
stance of the ECB might prove increasingly ineffective. For instance, for most periphery
countries, which need to pursue further substantial deleveraging in the private and public
sector in the short to medium term, we believe low interest rates are needed. At the same
time, the ECBs refinancing rate is, in our view, already too low for some core euro area
countries (most notably Germany), which have rebounded quickly from the 2009 slump and
are likely to run into capacity constraints as early as next year. Overall, this could generate a
situation where euro area inflation continues to surprise on the upside, while the ECB might
still feel constrained by the fiscal and financing problems faced by peripheral countries.
The ECB faces pressures to raise

interest rates while constrained
by the periphery problems
Figure 18: US corporates are awash with cash
Figure 17: US bank reserves

mil.$
Corp assets % of GDP
US bank reserves
4.0
1,200,000
3.5
1,000,000
3.0
2.5
800,000
2.0
600,000
1.5
1.0
400,000
0.5
200,000
0.0
1985
0
90
92
94
10 February 2011
96
98
00
02
04
06
08
10
1989
1993
1997
Checkable deposits and cash
2001
2005
2009
Time & savings deposits
14
UK inflation was 1pp or more above the governments 2% target throughout 2010, and we
expect it to breach 4% in the early part of 2011 (Figure 20). BoE Governor Mervyn King had
to write four letters last year explaining why inflation was so far above target. Surveys of the
general public show rising inflation expectations (Figure 21), although financial marketbased measures have been less worrying. So far, above-target UK inflation can be largely
attributed to stronger import price inflation, partly driven by the fall in sterling since 2007,
and increases in VAT. The majority of MPC members still believe that domestic inflationary
pressures are weak, as demonstrated by subdued pay growth and high unemployment, and
that inflation will fall below target in 2012. The large drag on activity from the governments
aggressive fiscal consolidation plan makes it difficult to envisage an overheating of the
domestic economy. Thus, while the relatively open UK economy may suffer from the effects
of elevated global inflation, it is unlikely to be a source of inflation itself.
We expect UK inflation to breach

4% in early 2011
However, most MPC members

still believe it is mostly imported
Central banks tend to point to core inflation rates, which have remained relatively tame. In
addition to tax increases (in the UK and Europe, although not in the US), the gap between
core and headline inflation has been driven by a rise in commodity prices, which is generally
seen as an exogenous shock. While this exogeneity may be true for most central banks, it
is less so for the largest economies, whose policies, at least in aggregate, have significant
influence on global liquidity. Indeed, liquidity conditions created by G4 central banks have
fuelled asset allocations into commodities. This adds to the rising long-term price trends
created by global real demand-supply dynamics for commodities. This is where the circle
closes: the shocks driving headline inflation above core may be much less exogenous than
could be claimed under more normal circumstances.
The gap between headline and

core inflation in the largest
economies is not all
commodity-driven
Figure 19: US corporates find funding via bond issuances

35
%
6
Corp liabilities % of GDP
Figure 20: UK Inflation
30
CPI
Forecast
Letter writing bounds

Target
25
4
20
15
10
0
1985 1988 1991 1994 1997 2000 2003 2006 2009
Bonds outstanding
Bank loans
0
05
06
07
08
09
10
Figure 21: UK general publics inflation expectations
Figure 22: G4 Inflation has been picking up
11
y/y %
%
5
4.5
1yr
4.0
2yr
3.5
5yr
Euro
Japan
UK
US
3.0
2.5
-1
2.0
-2
-3
1.5
05
06
Source: Bank of England
10 February 2011
07
08
09
10
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10

Source: Haver Analytics, Barclays Capital
15
Using inflation to reduce debt burdens by stealth?

Could advanced economies
inflate away their debt?
Except for Japan and maybe

Italy, the potential to dilute debt
by generating an inflation shock
is limited
The mere fear of inflation could

imply higher interest rates
Could higher inflation not at least help in dealing with growing debt burdens particularly
given how difficult the fiscal adjustments seem to be? Put differently, could advanced
countries not simply inflate away their debt? Theoretically, debt can be partly diluted by
generating inflation above expectations that is, before the interest rates demanded by
creditors can adjust. Hence, the effectiveness of inflation depends on both the size of the
surprise and on the maturity structure of the debt, which determines how quickly higher
marginal interest rates pass into the average interest rate paid on the debt.
To illustrate, we calculate for selected countries the potential impact of a persistent rise in
inflation of 2% ie, as shown in Figure 23, annual inflation turns out 200bp higher than
expected, and this is immediately reflected in higher interest rates on new issuance (but not
on existing fixed rate debt). Japan which has a debt stock with long maturity would gain
the most from generating an inflation surprise; the US, given the short maturity of its debt,
would gain less. Interestingly, the UK, despite the highest duration, would not have the largest
effect, given its large share of inflation-linked bonds. In any case, the calculations seem to
suggest that, with the possible exception of Japan and maybe Italy, the help from debt dilution
remains limited. For the US, the achieved reduction of the debt-to-GDP ratio by 7pp would be
only about 11% of the debt stock and come at the price of increasing inflation by 2pp, a price
most policymakers would probably avoid unless the alternative was default. 15
The risk is that the mere fear of higher inflation could make investors demand a higher
inflation-risk premium before the inflation actually occurred. This would leave policymakers
in the worst of both worlds: an even higher debt adjustment burden without the help from
surprise inflation. It adds further weight to the question: do the marginal benefits of keeping
easy policies in place still outweigh the potential costs of withdrawing them too late?
Do the benefits of easy policy still outweigh the potential costs?

A cost-benefit analysis of the wisdom of withdrawing fiscal and monetary stimulus needs to
consider the costs of tightening too early vis--vis the costs of leaving the economies
vulnerable to undesirable outcomes in which large and abrupt fiscal adjustments are forced
by markets (akin to what happened to peripheral European countries in 2010).
Deflation seems unlikely
The costs of tightening too early are most obviously related to the possibility of a double dip
in economic activity and/or deflation. The negative effects of a deflationary phase have
been well known since the work of Irving Fischer. 16 But deflation looks very unlikely for any
of the major countries excluding Japan. Indeed, G4 inflation has recently picked up (Figure
22) and, if anything, QE2 and loose policy globally have made inflation (not deflation) a
Figure 23: Debt dilution via inflation shock of 2% is non-negligible, but not enough
Modified
duration
Belgium
5.6
Inflation linkers
Expected %
Net debt to market value % of Expected change change in debt to
GDP
GDP
GDP 2010
in debt to GDP
82.4
0.0
-9.6
-11.7
France
6.8
57.1
8.3
-7.6
-13.2
Germany
6.3
50.5
1.8
-6.6
-13.0
Greece
4.5
97.3
3.6
-8.7
-9.0
Ireland
5.1
61.5
0.0
-6.5
-10.6
Italy
6.3
103.3
6.7
-12.9
-12.5
Japan
7.3
114.0
1.0
-17.6
-15.4
Spain
6.0
43.4
0.0
-5.5
-12.7
UK
8.8
51.3
16.7
-8.1
-15.9
US
5.3
67.8
4.4
-7.1
-10.5
15
Source:
OECD,many
Barclays
Capital
In addition,
of the
US government liabilities like Social Security and Medicare are inflation-indexed
16
See Irving Fischer, The Debt-Deflation Theory of Great Depressions, Econometrica, 1933.
10 February 2011
16
more likely theme in 2011. 17 In the US in particular, and as we mentioned previously,

disinflationary pressures appear to have reached a trough and the risks looks to be for
inflation to move higher, not lower.
More likely, some of the cyclical
unemployment could become
structural if unemployment
stays high for too long
...though the existence of

cyclical unemployment does
not imply that it would not
continue to come down in the
face of tightening
The risks and costs of extending

easy policy are intrinsically
related to the fiscal vulnerability
of advanced economies
A small change in sentiment can

trigger sharp reactions in
the markets
More likely, in our view, is the possibility that some of the cyclical unemployment becomes
structural or that, in general, output capacity is lost if unemployment stays high for too long
(Ball 2009). 18 The magnitude of the problem depends on the size of the current
unemployment rate relative to its natural level and on the probability that the start of the
tightening cycle derails the recovery. We calculate that most of the unemployment is
structural (Figure 24), although there is 1-2pp of cyclical unemployment in G4 economies.
The existence of cyclical unemployment does not imply, however, that it would not continue
to come down in the face of some tightening. Following the recessions of 1991 and 2001, the
unemployment rate (UR) peaked on average 17 months after the NBER business cycle trough
and the Fed started the tightening cycle, on average, 16 months after this peak in the UR.
These were already exceptions, as in the six recessions prior to 1991, the UR typically peaked a
few months after the trough and the Fed started to tighten a few months later. In the current
situation, if the Fed were to tighten in August of 2012 (our call), this would put the lag
between the peak of the UR and the start of the tightening cycle at 34 months. Our Taylor-rule
calculation (based on our expectations with regard to unemployment and inflation) suggests
that, by then, optimal rates would already be 2.6%.
Although the costs of moderate tightening appear modest, the costs of maintaining the
status quo do not. The risks of keeping easy policy longer are intrinsically related to how
fiscally vulnerable advanced economies have become and to the related increase in inflation
expectations. The deterioration of fiscal fundamentals in many advanced economies may
bring them close to a tipping point where they may be vulnerable to a sudden switch in
market sentiment and undesirable outcomes. The experience of peripheral euro area
countries this year is a reminder of how rapidly markets can move from a good equilibrium
of low rates and apparently manageable debt dynamics to a bad one of high funding
costs and explosive debt dynamics (Figure 25).
Triggers of changes in sentiment can vary: it may be a shift in global appetite for risk; a
default/restructuring in one country that focuses investor attention on possible contagion;
or failure to take necessary actions to bring countries back to sustainable debt paths. It is
impossible to pin down exact triggers and timing. 19 But once it happens, the changes in
Figure 24: Cyclical unemployment and NAIRU
Figure 25: Changes in market sentiment can be abrupt
Unemployment
(latest)
NAIRU
9.0%
7.0%
2.0%
Japan
5.1%
4.2%
0.9%
Euro Area
10.0%
8.4%
1.6%
UK
7.9%
6.9%
1.0%
US
Note: At the end of January, 2011. Source: Barclays Capital
17
18
19
10 February 2011
Cyclical
unemployment
Greek 10Y government bond, YTM (%)

14
13
12
11
10
9
8
7
6
5
4
Jan09
Mar09
May09
Jul09
Sep09
Nov09
Jan10
Mar10
Source: Bloomberg
In our most recent Global Macro Survey only 6% of respondents thought deflation was a likely theme in 2011.
See Laurence M. Ball, Hysteresis in Unemployment: Old and New Evidence, NBER Working Paper No. 14818, March 2009.
This fear is in our view behind the recent fiscal adjustment packages in the UK and France
17
yields/spreads can be severe: relatively small changes in default probabilities can result in
yield increases that worsen debt dynamics and in turn increase the risk of default,
exacerbating the increase in yields. Once in motion, markets do not naturally stabilize:
external factors, such as a credible fiscal adjustment and public sector funding (often a
combination of both) are necessary to halt the vicious dynamics.
The US and Japan will
eventually have to restore
fiscal sustainability
Easy policy is also reflected in

increased inflation expectations
Paradoxically, two of the countries with the worst debt dynamics have some of the lowest
yields: the US and Japan. The former benefits from the exorbitant privilege of issuing the
worlds currency, the latter from a strong domestic bid resulting from a large base of local
investors. These factors can buy time and may postpone the day of reckoning, but there is no
alternative to the eventual restoration of fiscal sustainability. And lack of market discipline may
actually be counterproductive if the problem is left unresolved for too long as debt stock rises
exponentially. Indeed, one could argue that the reason that the unsustainable dynamics in
some (not all) of the peripheral countries were not tackled earlier was, at least in part ,the
prolonged market (mis)perception that their credit risk was similar to that of Germany..
The costs of easy policy are also manifest in increased inflationary expectations (Figure 26).
Either because of fears of inflating the debt away or because of fears of excessively easy
monetary conditions, inflation expectations have increased globally, particularly after QE2.
Increases in inflation expectations once deflation is a risk are clearly welcome, but if they
move beyond central banks comfort zones they become problematic as they may require
aggressive tightening as central banks play catch-up.
Goods inflation itself is bad enough. But the risk of falling behind the curve increases when
easy policies result in asset price inflation as well. Asset markets booms (and busts) have
historically exacerbated economic cycles through a number of well understood channels, in
particular when related to real estate prices. Recent rallies in asset prices can in part be
justified by the strengthening of the global recovery, but it is not by chance that the rise in
risky asset prices stepped up significantly after QE2 was telegraphed to the market. The
combination of super easy policies (and the expectation of their continuation in the future),
the global economic recovery, and the perception that there have been structural changes
meriting improved valuations in certain assets (commodities and EM are prime candidates),
could become a recipe for future asset price overshooting, and eventual bubbles, as these
factors will tend to reinforce themselves.
Our analysis favors modest

tightening over easy policy
Our analysis suggests that a modest tightening is a superior alternative to the continuation
of easy policies in advanced economies. But how to tighten policies? We have argued that
because of the stage of the business cycle, both fiscal and monetary policies need to be
tightened. But our concerns about debt dynamics in advanced economies suggest that
fiscal contraction is doubly guaranteed. Indeed, if fiscal policy is tightened, monetary policy
may be tightened at a much more modest pace and hence remain loose for longer.
However, outside a few countries, aggressive and frontloaded fiscal contraction does not
appear to be forthcoming as the political economy of many of the advanced economies
(and certainly of the US and Japan) makes fiscal tightening very complicated. This suggests
that over-tightening on the monetary front may be necessary.
Risks from easy policies in emerging markets

EM also face challenges related
to their dovish policies and
abundant global liquidity
10 February 2011
EM economies also face challenges: their dovish policies, even if they originate from a
different dynamic, may likewise result in problems down the road. Most emerging markets
faced the financial crisis from a position of strength: the accumulation of reserves, strong
fiscal conditions, tight banking regulation and overall strong fundamentals allowed them to
bounce back rapidly. However, the potential sizable capital inflows associated with
abundant global liquidity, spurred by G4 central banks, and the newly found attractiveness
of emerging markets have generated domestic inflationary pressures. These are manifest in
food inflation, boosted by commodity price increases, but also in assets such as real estate
and stock markets.
18
Capital inflows put upward pressure on currencies. This generates policy dilemmas as
measures to restrain inflation (via interest rate increases) may result in the currency
appreciation that most EM policy authorities want to avoid.
Capital inflows generate

policy dilemmas
Although it is difficult to generalize, we think it is fair to say that most EM countries appear
to favor a weak exchange rate at the risk of potentially higher inflation. Intervention in FX
markets has certainly increased (Figure 27). In Asia, policies continue to be mostly leaning
against the wind; in Latin America, there appears to be a growing focus on shoring up
competitiveness; and EM EMEA offers a range of preferences among policymakers.
Intervention in FX markets
has increased
Intervention tools are diverse. Some countries have turned to currency-unfriendly monetary,
tax and regulatory policies; however, with few exceptions, the scale of intervention remains
modest. Chile is an outlier in the magnitude of the shift in FX-intervention policy; it has gone
from doing very little to committing to buy USD12bn (roughly 6% of GDP) in the coming year.
Brazil is arguably also an outlier in the investor-unfriendliness of the policies it has adopted to
discourage capital inflows and weaken its currency. A recent policy shift in Turkey that
combines a further reduction of policy interest rates with hikes in banks reserve requirements
sparked a debate about the future course of monetary policy. South Africa also presents an
interesting case: in late 2010, changes in legislation limiting outflows from locals were
loosened in an apparent effort to encourage more domestic money to head offshore and thus
weaken the currency without directly affecting foreign investors.
Intervention tools vary, but

the scale of intervention
remains modest
Market participants tend to be suspicious of government attempts to affect the exchange rate,
believing it distorts relative prices and resource allocation. However, things are more complex
than that. The exchange rate is both an asset price and the relative price between domestic
and foreign goods; as such, it is subject to market sentiment that can move rapidly from
euphoria to depression. Policymakers are probably right to seek to limit appreciation pressures
beyond what is justified by medium-term fundamentals. To the extent that these measures
reduce the tendency for capital inflows to translate into a domestic asset-market boom (and
eventual bust), we think they should be viewed positively by investors. However, in some
cases, reluctance to allow currency appreciation may reflect a mercantilist approach:
policymakers are using the exchange rate as the main tool to enhance (export-driven) growth
instead of implementing more targeted measures to enhance productivity.
To some extent, we think

government limitations on
capital inflows should be viewed
positively by investors
We have some sympathy with the desire to limit excessive currency appreciation. However,
the policy combination of FX intervention with easy domestic monetary policy is risky. At a
global level, there is a lack of policy coordination. Although many EM policymakers appear
determined not to be recipients of flows that have been deflected from other countries, the
result is that monetary policy remains too easy on a global scale.
Figure 27: EMFX intervention (% GDP) has increased

10
9
8
7
6
5
4
3
2
1
0
-1
1.5
Aug-10
Sep-10
Source: Barclays Capital
10 February 2011
Oct-10
Nov-10
Dec-10
Jan-11
H1 2010
India
China
2.0
Chile
2.5
Mexico
3.0
Chile's intervention plan for 2011
S.Africa
UK 5y5y breakeven rate
Brazil
US 5y5y breakeven rate

3.5
Turkey
Euro 5y5y inflation swap rate
Korea
4.0
Russia
Figure 26: Inflation expectations have increased
Israel
monetary policy is risky
Taiwan
FX intervention and easy
Peru
however, the combination of
H2 2010
Source: Bloomberg, Haver, national sources, Barclays Capital
19
Currency policy alone is not likely to address the deterioration in trade balances or the
stresses that may be associated with them. Generally speaking, economics tells us that
external adjustment requires both exchange rate (expenditure-switching) and demandmanagement (expenditure-reducing) policies. If the demand-management (ie, fiscal policy)
component of the policy effort is not ambitious enough, aggressive policies to weaken the
exchange rate can lead to inflation. And, in the current environment of quasi-pegged
exchange rates, fiscal policy is particularly powerful.
Aggressive currency control can

lead to inflation
More generally, central banks appear to have been distracted from their core responsibility to
control inflation. Although core and headline inflation in many EM economies have yet to
approach levels that challenge official targets, they are almost everywhere on the rise. The
average inflation breakeven levels in China, Brazil, Chile, Colombia, Israel and Korea are at (or
close to) their 12-month highs and the momentum suggests that global inflationary pressures
will remain on the rise. The risk of being distracted from inflation responsibility could lead to
monetary policy being forced to play catch-up (with sharp hikes and ultimately disruption for
the economic recovery).
Central banks appear to have

been distracted from their
inflation responsibility
A more volatile world

Since 2007, the global economy has experienced continual shocks. Although we should not
extrapolate the recent past into the future, a world of higher volatility than pre-2007 would
not be surprising. After all, the so-called Great Moderation years of the 1990s and the
beginning of the last decade stand out as an exception in terms of lengths of economic
recessions, low inflation and relatively stable growth. The 1950s and early 1960s also
experienced low inflation but, even if declining, output volatility was much higher than during
the Great Moderation (Figure 28).
A world of higher volatility than

pre-2007 is possible
Even if they disagree on their relative contribution, economists believe that the Great
Moderation was the result of three factors: better policy, structural changes, and good luck. In
reverse order, the good luck factor contends that the reduction in macroeconomic volatility
described as the Great Moderation was mostly a reflection of smaller and more infrequent
exogenous shocks hitting the economy. Explanations focusing on structural change pointed
to changes in technology, business practices and other features that boosted economies
ability to absorb shocks: technology-driven improvements in inventory management,
deregulation in many industries, a shift away from manufacturing toward services, increased
openness to trade (and the related cost improvements), and freer and more sophisticated
financial markets.
The Great Moderation was the

result of three factors: better
policy; structural changes; and
good luck
Figure 28: The Great Moderation was an exception

10
9
8
7
6
5
4
3
2
1
0
Figure 29: Disinflationary pressures turning upside down
Great Moderation
years
4.5
300
4.0
250
3.5
3.0
2.5
100
1.5
50
Mar-10
Mar-06
Mar-02
Mar-98
Mar-94
Mar-90
Mar-86
Mar-82
Mar-78
Mar-74
Mar-70
Mar-66
Mar-62
150
2.0
1.0
Mar-58
200
0
1980
1984
1988
1992
1996
US imports deflator
Average inflation (%), lhs
2004
2008
US CPI
GDP volatility, rhs
Note: Each quarter is calculated for the decade before, on a 3-months rolling basis.
10 February 2011
2000
Note: Indexed to 1980=100

20
Finally, the better policy argument builds on the general agreement that monetary policy
played a large part in stabilizing inflation since the early 1980s. The late 1960s and 1970s
were fraught with policy mistakes. Central banks tried to exploit short-term trade-offs
between unemployment and inflation (move along the Phillips curve) and claimed that
inflationary factors were to the result of supply-side shocks and hence beyond their control.
These policies failed. After those stop-go failures, policymakers moved from short-sighted
behaviour to a more intermediate term view, exemplified by Fed Chairman Paul Volckers
anti-inflationary measures in the late 1970s and early 1980s, Alan Greenspans anticipatory
tightening and the widespread move to inflationary targeting across the globe since 1990.
Analysis of these factors
suggests the Great Moderation
will be partly reversed
Inflationary pressures have

replaced disinflation fears
The good luck factor seems to

have turned the other way
The fading of those factors puts

a greater burden on policies
Easy policy generated a false

sense of stability and led to
excessive risk-taking, which
eventually led to the 2007 crisis
Overconfidence impaired the

quality of policymaking in the
late 1990s
An analysis of the likely evolution of these factors suggests that the Great Moderation will
be partly reversed. We can start with structural or simply good luck factors. The
disinflationary pressures from the emerging world that contributed to the observed
reduction in inflation appear to have diminished (Figure 29). This process started before
2007, even if it was obscured by the financial crisis (Chapter 3). The trade liberalization in
the 1990s by the worlds most populous countries, coupled with their strong productivity
growth, put downward pressure on global manufacturing prices. Chinas domestic
inflationary pressure makes it apparent that the country has entered a Lewisian turning
point or (most likely) the phase where wage pressures reflect the diminishing excess labor
from the rural sector. If anything, the emergence of other economies, in particular of the
increasingly prominent role played by India, is likely to push global demand more than
global supply (something that is already evident in commodity prices) and hence generate
inflationary, not disinflationary, pressures.
It is also unlikely that good luck factors associated with smaller and less frequent shocks will
continue. The magnitude and frequency of shocks of the last 3.5 years suggest that, if
anything, the luck factor has turned the other way; there are serious candidates for
destabilising an inherently more unstable global economy. We are not going to make an
exhaustive list of potential risks. But, as we argued earlier, perhaps the biggest challenge
relates to public sector debt dynamics in advanced economies. A persistent increase in
inflation is also likely. The combination of easy policy in advanced economies, strong
growth in emerging economies and reluctance to let EM currencies appreciate appear
conducive to global inflationary pressures. Advanced economies may have to start to live
with lower growth and higher inflation than in the past decade.
The fading help from structural factors and good luck puts even more of a burden on policy.
Yet we see at least two reasons why policy is unlikely to be as helpful as in the past. First,
policymakers have largely used up their ammunition. High public debt burdens and extremely
low policy rates (combined with bloated central bank balance sheets) leave little room for
stabilization. A shock of Lehman Brothers proportions almost certainly could not be fought
with the same vigour, but if current unsustainable policies continue, even smaller shocks will
be difficult to offset. Aggressive action could even increase, not reduce, uncertainty.
Second, with the benefit of hindsight, we can now see that the monetary policy towards the
end of the Great Moderation years was actually unsustainable. Observed volatility
benefited from extremely easy Fed policy: by acting very aggressively during downturns, the
Fed reduced the amplitude of recessions. But easy policy generated a false sense of stability,
encouraging increased risk-taking and leverage that effectively increased the probability of
events and led to dotcom bubble and later to the housing bubble that preceded the 2007
crisis. Hyman Minsky 20 has already shown that it is precisely during apparently tranquil
times that decisions that eventually lead to a bust are taken.
Indeed, we think the quality of policymaking began to deteriorate in the late 1990s as
policymakers grew overconfident: Alan Greenspan first resisted tightening (1997) and then
eased into what was already a late-cycle boom. Indeed, some of the short-sightedness of
20
10 February 2011
Minsky, Hyman, Stabilizing an unstable economy, Mc Graw Hill 2008.
21
monetary policy in the 1960s and 1970s, as reflected in Bernankes Great Moderation
speech (2004) 21, can also be perceived in the policies of the late 1990s and the early part of
the last decade:
The output optimism of the late 1960s and the 1970s had several aspects. First, at least
during the early part of that period, many economists and policymakers held the view that
policy could exploit a permanent trade-off between inflation and unemployment, as described
by a simple Phillips curve relationship. The idea of a permanent trade-off opened up the
beguiling possibility that, in return for accepting just a bit more inflation, policymakers could
deliver a permanently low rate of unemployment. This view is now discredited, of course, on
both theoretical and empirical grounds. Second, estimates of the rate of unemployment that
could be sustained without igniting inflation were typically unrealistically low, with a long-term
unemployment rate of 4 percent or less often being characterized as a modest and easily
attainable objective. Third, economists of the time may have been unduly optimistic about the
ability of fiscal and monetary policymakers to eliminate short-term fluctuations in output and
employment, that is, to fine-tune the economy.
An immediate and
sustained focus on regaining
fiscal sustainability is
required, and central banks
need to start withdrawing the
extreme stimulus
Where does this leave us in terms of economic policy? Facing a potentially unstable
environment and with fewer available options than has been the case for a long time, we
believe policymakers need to be more humble, risk averse, and, importantly, forwardlooking. An immediate and sustained focus on regaining fiscal sustainability is certainly
needed. Equally importantly however, central bankers must avoid introducing additional
instability by getting behind the curve and failing to start withdrawing the extreme stimulus.
The risk of goods inflation is very real, but asset price inflation (and eventual bubbles) is as
likely and potentially more dangerous given its well known effects of amplifying economic
cycles. In emerging economies, this means more aggressive tightening than currently
appears to be in prospect. For the US, it means that if the Fed does not want to fall behind
the curve, it will need to begin to shift to tightening in a matter of months, not years.
21
Bernanke, Ben, The Great Moderation, Remarks at the meetings of the Eastern Economic Association, Washington,
DC February 20, 2004.
10 February 2011
22
Appendix 1: Long-term growth prospects

Growth prospects may
not be particularly bright
Demographic trends may take a

toll on overall growth
not only in
advanced economies
Productivity may offer only a

partial offset
A number of structural factors suggest that medium-term growth in advanced economies

may be below pre-2007 levels. This is particularly important because a significant part of
the risk-to-debt sustainability comes from such a possible slowdown, as detailed below. As
is well known, growth depends on increases in factors of production (such as labor and
capital) and productivity improvements that may come from enhancements in the quality
of education, technological advances, better policies, and changes in political and socioeconomic institutions. The reallocation of economic activity across sectors can also slow
growth by affecting the employment of factors, but only temporarily.
One key factor with a persistently negative effect on growth arises from demographic
trends. Although advanced economies are unlikely to experience a particular deepening in
capital accumulation, in light of their stage of development, labor supply may change.
Indeed, their population growth is expected to decline significantly over the coming
decades. In addition, the aging population structure implies that growth in the labor force
will be even slower than population growth, reversing the pattern of the past few decades,
as baby boomers enter retirement (Figure 30 and Figure 31).
This demographic change is not unique to advanced economies. A decline in population
growth, and an even stronger decline in the working age population, is actually more visible
in developing countries than in advanced economies (Figure 32 and Figure 33). Most
interestingly, the pattern is driven not only by China, with its single child policy, but is also
common across a wide spectrum of countries across all regions.
This pattern is likely to reduce employment growth significantly in the absence of offsetting
factors, such as immigration, changes in the natural rate of unemployment, changes in
female participation, and other socio-demographic effects. In turn, this will slow overall
economic growth, although part of the effect is likely to be offset by productivity gains driven
by the fact that scarcer availability of labor will be an incentive for firms to accumulate more
capital and innovate. Some academic studies have even estimated that in the US, changes in
labor productivity associated with changes in working age population growth are generally
large enough to offset the latter, leaving overall growth unchanged. 22 However, a full offset is
unlikely. Indeed, such a result would suggest that the internet revolution of the 1990s was
spurred by demographic factors rather than by past military investments, and that the
growth slowdown of the 1970s stemmed from demographic factors rather than the oil
shock (which can be only partly attributed to larger global demand related to the baby
boom). 23 Moreover, even if one espouses the idea that oil price movements are generally
driven by the effect of population growth on global demand, a major repercussion from oil
prices on GDP growth (similar to that of the 1970s) is unlikely. Indeed, the oil dependence of
economic systems is on a declining trend even in countries such as China and India, which
implies a declining effect on growth from oil prices, as demonstrated by the small effect on
growth of the large oil price increase of the past decade. 24
22
See for example, http://www.bos.frb.org/economic/conf/conf46/conf46e1.pdf, and references therein.

Big historical events can generate a spurious correlation in the above results about productivity and demographics.
Indeed, cross-sectional analyses (which are good at capturing the long-run effects and are immune from these time
patterns) indicate no particular relation between per capita growth and population growth (see, for example, Ross Levine
and David Renelt (1992) A Sensitivity Analysis of Cross-Country Growth Regressions, The American Economic Review,
Vol. 82, No. 4, pp. 942-963).
24
See slide 12 in the 2011 British Petroleum Energy Outlook
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy
_review_2008/STAGING/local_assets/2010_downloads/2030_energy_outlook_booklet.pdf
23
10 February 2011
23
Figure 31: Growth in working age (15-64) and total

population 2011-2040 (%)
Source: UN Population data


3.0
15-64
3.0
Total
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
15-64
JPY
AUD
DKK
EUR
SEK
SPA
IRL
BEL
ITA
Total
GER
CAD
WRLD
JPY
-1.50
DKK
-1.50
AUD
-1.00
NLD
-1.00
SEK
-0.50
SPA
-0.50
IRL
0.00
BEL
0.00
ITA
0.50
GER
0.50
FRA
1.00
CAD
1.00
GBP
1.50
USD
1.50
WRLD
15-64
2.00
Total
USD
15-64
GBP
2.00
FRA

Total
-1.0
Advanced LatAm
EM
EMEA
EM Asia EM Asia EM Asia

ex-China ex-China,
India
Advanced LatAm
EM
EMEA
EM Asia EM Asia EM Asia

ex-China ex-China,
India
Figure 34: Overall score of school achievement (PISA 2009)

600
Significantly above OECD avg

Similar to OECD avg
550
Significantly below OECD avg
500
450
400
OECD
China
Korea
Finland
Hong kong
Singapore
Canada
New
Japan
Australia
Netherlands
Belgium
Norway
Estonia
Switzerland
Poland
Iceland
US
Sweden
Germany
Ireland
France
Taiwan
Denmark
UK
Hungary
Portugal
Italy
Latvia
Slovenia
Greece
Spain
Czech
Slovakia
Israel
Luxembour
Austria
Turkey
Russia
Chile
Bulgaria
Uruguay
Mexico
Romania
Thailand
Colombia
Brazil
Tunisia
Indonesia
Argentina
Peru
350
Source: OECD PISA, 2009
10 February 2011
24
Education will be among the

most important growth factors
in decades to come
The education gap between

the US and China may explain
up to 2pp of the per capita
growth differential
Sectoral reallocation of
resources may slow
growth temporarily
as some sectors (such as

finance and retail) may not
continue to grow as fast
as before
and expenditure shifts

from young to old become
more relevant
Fiscal consolidation may also

take a temporary toll on growth,
but the effect should be positive
A second key factor likely to drive growth is the quality of education. This will most likely
appear quite prominently on policymakers agendas. Extensive research has shown that
academic achievement, as measured, for example, by test scores in math, science, and
literacy, is much more indicative of the potential for growth than school presence, as
measured, for example, by number of hours of schooling. 25 Not all advanced economies
rank highly. Of the 64 countries tested for the 2009 PISA indicators (Program for
International Student Assessment, OECD), 17 performed above the OECD average, four of
which (China, Korea, Hong Kong, Singapore) were in emerging Asia. The US, Germany, and
France, are not among the 17: they are close to the OECD average. Italy, Spain, and Greece
perform below the OECD average, and Portugal is just barely above it (Figure 34). Adequate
investment in education will be crucial to raising countries living standards and ensuring an
adequate position in the global rankings. It has been shown that the distance in the quality
of education between the US and China (Shanghai) may explain as much as two percentage
points of annual per capita GDP growth differential, after all other factors have been
considered. 26. And even just reaching a growth rate of this magnitude is more than most
advanced economies can dream of, let alone achieving it just from education attainments.
Third, it is important to consider temporary factors that may pertain to the near future.
Growth may slow in some of the fast-expanding sectors that contributed significantly to the
overall economic expansion of the past few years. The associated sectoral reallocation would
imply a temporary deceleration in overall growth until the required reallocation of resources
across sectors had occurred. For example, in several advanced economies, growth in the
financial sector in 1995-2007 was 20-80% larger than overall GDP growth (Figure 35 and
Figure 40). This was generally associated with robust employment growth, but in some
countries (notably the US and UK) also with higher value added per worker, likely as a result of
financial innovation. It is possible that deleveraging and the more limited use of derivatives,
coupled with tighter regulation, will bring growth in this sector more in line with the rest of the
economy. The retail sector had an impressive performance, particularly in the US, in part
because of low import prices from China and innovation in the distribution sector (eg, WalMart). To the extent that wage and cost pressures in China push towards higher real
exchange rate appreciation, expansion in the retail sector in advanced economies may slow.
Contrary to popular belief, the construction sector has experienced positive growth in only a
few countries, notably Ireland, Spain, and Greece, and not in the US or the UK (note, however,
that official records do not reflect activities in the informal sector, which are likely to be
significant in construction, so growth in this sector may be significantly underestimated).
A fourth effect may result from the reallocation of resources across sectors demanded by an
aging society in the presence of different spending patterns across age groups. This effect will be
more relevant for countries with limited labor market flexibility, as in Europe. Overall, it is likely to
be small, as the spending changes will likely be gradual and, in part, anticipated.
Finally, fiscal consolidation should contribute to lower growth in the initial phase via a lower
negative effect on aggregate demand. 27 As public finances improve, a decline in domestic
interest rates is to be expected. This would, in turn, stimulate capital accumulation and growth.
in the long run
25
http://edpro.stanford.edu/hanushek/admin/pages/files/uploads/Edu_Quality_Economic_Growth-1.pdf
ibid.
See the strong evidence in this direction offered by the October 2010 IMF World Economic Outlook
http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf
26
27
10 February 2011
25
Contribution to real GDP growth from growth in employment and in output per worker (1995-2007 average*)
Figure 35: Financial services (%)
Financial services
4.0
Labor productivity growth
Figure 36: Retail trade (%)

Retail trade
3.0
2.0
GBP
USD
IRL
1.0
JPY
0.0
FRA BEL
GER
GRC
ITA
-1.0
-2.0
SPA
-3.0
-4.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Employment growth
7.0
8.0
3.5
3.0
2.5
2.0
1.5
USD
GRC
IRL
GBP
1.0
0.5
0.0
-0.5
-1.0
-1.5
-1.0
JPY
BEL GER FRA

ITA
SPA
0.0
1.0
2.0
3.0
Employment growth
Source: OECD, Barclays Capital
Figure 37: Manufacturing (%)
Figure 38: Transportation (%)
Manufacturing
14.0
IRL
8.0
12.0
7.0
GRC
10.0
6.0
5.0
8.0
USD
JPY
4.0
GBP
3.0
6.0
FRA
BEL
GER
GRC
1.0
GER
2.0
ITA
-2.0
GBP
FRA
USD
ITA
JPY
BEL
4.0
2.0
0.0
-3.0
SPA
-1.0
0.0
1.0
Employment growth
2.0
3.0
0.0
-2.0
0.0
Figure 39: Construction (%)
Figure 40: Other sectors (%)
Construction
3.0
2.0
BEL
1.0
GER
JPY
GRC
ITA
FRA
-4.0
-4.0
SPA
4.0
8.0
Employment growth
JPY
ITA
0.0
-0.2
12.0
SPA
GER
0.4
0.2
USD
GRC
1.0
0.8
0.6
IRL
0.0
8.0
1.4
1.2
-2.0
-3.0
6.0
Other
1.8
1.6
GBP
0.0
IRL
SPA
2.0
4.0
Employment growth
5.0
Transportation
9.0
-1.0
4.0
0.0
IRL
FRA BEL
GBP
USD
1.0
2.0
Employment growth
3.0
4.0
Note: total real GDP growth for the respective sector is approximately the sum of the employment growth and the labor productivity growth.
* For Japan the data is 1995-2006 average.
10 February 2011
26
Appendix 2: Learning from past debt reductions

High nominal growth assisted
large debt reductions
Fiscal consolidation played a role

mainly in Europe, not the US
The recent history of debt-to-GDP reductions and fiscal consolidation in advanced

economies offers a few indicative lessons. 28 First, large debt reductions were assisted by high
nominal growth. Figure 41 and Figure 42 show debt ratios at major peaks and 10 years later,
as well as the average nominal and real GDP growth, inflation, interest rates, and fiscal
performance during the 10 years of the adjustment. Significant reductions in debt ratios have
rarely occurred with nominal growth lower than 5-6% and real growth lower than 3%. For
example, US debt-to-GDP rose from about 50% in 1940 to about 122% in 1946; it
subsequently declined to about 62% by 1956, during a period when nominal GDP grew at
about 7% and real GDP at 4%. High inflationary periods, such as post-WWII in Italy, are
associated with the most impressive debt ratio reductions. But high real growth was also
quite effective, as in Ireland, where 7% real growth in the 1990s helped cut debt by twothirds, and Spain, which posted 4% real growth after debt peaked in 1996. Lethargic growth,
as in Italy over the past two decades, has been associated with a limited reduction in debt.
Second, especially in the more relevant recent history, fiscal consolidation efforts via
expenditure cuts or tax increases have played a significant role in bringing down debt ratios,
mainly in European countries (Belgium, Ireland, Spain and Sweden) and Canada, where the
underlying primary balance improved by more than 3% of GDP with respect to the 10-year
average pre-debt peak. But how are such fiscal consolidations implemented?
Figure 41: Historical cases of debt reduction from peak (1960-2005)

1960-2005
Gross public debt

% GDP
Peak year at peak
% reduction after
10 years
Nominal GDP
Real
GDP
Inflation
Average annual % change in the

10 years after debt peak
Interest
rates
Underlying primary balance
At end of 10 % of GPD, difference b/w 10Y

year period averages pre- and post-peak
Ireland
1991
110
66
12
Australia
1995
41
61
Spain
1996
76
39
Norway
1978
54
39
10
Sweden
1996
84
37
Netherlands
1993
96
36
Denmark
1993
85
33
-1
Finland
1996
66
31
Canada
1996
102
31
Belgium
1993
141
27
United States
1993
72
16
Italy
1998
133
13
France
1998
70
-8
*Germany
1998
62
-12
*Japan
1987
77
-31
Note: Germany primary balance is averaged six years back (not 10). Japan primary balance is averaged seven years back.
Source: OECD, Haver, IMF, Barclays Capital
28
For recent references, see for example October 2010 IMF World Economic Outlook
http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf; Alesina Alberto and Silvia Ardagna, 2009, "Large
Changes in Fiscal Policy: Taxes versus Spending," NBER Working Paper No. 15438. http://www.nber.org/tmp/16867w15438.pdf
10 February 2011
27
Figure 42: Three cases of debt reduction from peak (1900-1960)

Gross public debt
Italy
United States
United Kingdom
Nominal GDP
Peak
year
% GDP
at peak
% reduction after
10 years
1943
1946
1946
103
122
270
68
49
47
Real GDP
Average annual % change in

the 10 years after debt peak
41
7
8
4
4
2
Source: Haver, IMF, Barclays Capital
Expenditure-based
consolidations have been found
to be more successful
but they are also more

necessary in countries with large
expenditure to GDP ratios.
Research suggests that fiscal adjustments that rely mainly on expenditure reduction have
tended to be more successful than tax-based adjustments in persistently improving the
debt ratios and primary balance, and lowering spreads (see Figure 43 for examples of large
fiscal consolidations in past decades). Additionally, most of the successful expenditurebased adjustments relied on cutting transfers, social benefits, subsidies, and wages.
Stronger credibility also tended to help front-loaded adjustments.
However, the expenditure focus was needed mainly where the fiscal imbalances were
driven by surges in public expenditures in the first place (Figure 9). Indeed, most
expenditure-based adjustments were in Europe, where, historically, expenditure to GDP is
high. In the US, where the size of the government was already lower than in other advanced
economies, the adjustment was mainly via higher revenues, although part of such revenue
increases may have simply been spurred by high growth (see Box 1, Our Measure of Fiscal
Vulnerability: A systematic global approach, 9 September 2010).
Figure 43: Large fiscal consolidations
Country
Ireland
End-year
Starting year
Size
Of which: Revenue
increase
1989
1978
20.0
8.1
Of which: Primary
expenditure
reduction
Average nominal
growth during
adjustment period
11.8
13.0
Sweden
2000
1993
13.3
3.0
10.4
4.8
Finland
2000
1993
13.3
2.6
10.7
6.0
Sweden
1987
1980
12.5
7.2
5.3
10.5
Denmark
1986
1982
12.3
6.3
6.0
10.2
Greece
1995
1989
12.1
9.9
2.3
16.7
Belgium
1998
1983
11.1
0.4
10.7
5.2
Canada
1999
1985
10.4
4.0
6.4
5.4
United Kingdom
2000
1993
8.3
3.2
5.1
5.8
6.8
Japan
1990
1978
8.1
7.0
1.1
Italy
1993
1985
7.9
8.9
-1.0
9.0
Portugal
1985
1981
7.5
8.3
-0.8
22.9
7.3
Luxembourg
2001
1991
6.7
5.2
1.6
Iceland
2006
2002
6.3
4.6
1.6
8.7
Netherlands
2000
1990
6.3
-2.8
9.0
5.6
Denmark
2005
1994
5.9
2.1
3.8
4.5
Australia
1988
1984
5.8
0.7
5.1
11.7
New Zealand
1995
1991
5.8
-1.3
7.1
4.9
Austria
2001
1995
5.8
1.1
4.6
3.5
Iceland
2000
1994
5.7
4.9
0.7
7.5
United States
2000
1992
5.7
3.0
2.6
5.8
Germany
2000
1991
5.3
3.4
1.9
5.4
Switzerland
2000
1993
5.2
4.6
0.6
2.3
Spain
2006
1995
5.2
2.5
2.7
7.5
Source: Table 5a. from Strategies for Fiscal Consolidation in the Post-Crisis World, by the IMF (see: http://www.imf.org/external/np/pp/eng/2010/020410a.pdf),
OECD, Barclays Capital
10 February 2011
28
CHAPTER 2
Navigating the new EM landscape: Where to find

the best returns
Michael Gavin
In the six years since this series last took up emerging markets, much has changed.
Global influence has moved from the slow-growing G7 to booming China,
contributing to EM growth outperformance. EM also weathered the 2008 credit
crisis remarkably well, despite some initial scepticism, due predominantly to robust
policy frameworks tempered in earlier booms and busts. We think investors should
expect EM economies to deliver higher growth and lower volatility than in the past,
improving economic Sharpe ratios relative to the lagging G4.
Six years ago, it seemed natural to focus on external sovereign debt, and that was
not a bad call. In the six years through 2010, EM external debt returned an average
of nearly 9% per year, outperforming US Treasuries (by some 400bp per year), USD
high-grade (roughly 350bp per year) and USD high-yield (by nearly 100bp per year).
It underperformed developed-market equities by only about 100bp per year, with
about half the volatility.
EM external debt is unlikely to be where the investment action will be. The asset
class is shrinking in quantitative significance, and returns are constrained by high
valuations that reflect the much lower credit risks. Local debt markets are more
interesting but provide limited exposure to the emerging market growth engine that
is likely to be the dominant economic and market theme of the coming 5-10 years.
Although EM growth outperformance is part of the received market wisdom, we

think it is not fully priced in to todays equity markets. We forecast EM equity market
returns of more than 10% (in USD, adjusted for US inflation), in line with the past
decades strong performance. In absolute and volatility-adjusted terms, the most
promising equity markets are those where we expect highest growth; six of the 10
most promising are in Asia.
+1 212 412 5915

michael.gavin@barcap.com
Piero Ghezzi
+44 (0) 20 3134 2190
piero.ghezzi@barcap.com
Alanna Gregory
+1 212 412 5938
alanna.gregory@barcap.com
Jose Wynne
+1 212 412 5923
jose.wynne@barcap.com
The economic landscape a macro roadmap 1

Greater growth
Emerging markets: the worlds
new growth engine
Growth in the regional giants of

Asia is being driven by
globalization and urbanization
The spectacular growth of emerging market economies in the past decade has been an
economic, market and geopolitical game-changer of tectonic proportions. In the past 10
years, emerging markets have grown from less than 20% to more than 30% of world GDP;
by 2012, we expect emerging markets to account for well over one-third of world GDP at
market exchange rates, and more than half at PPP exchange rates. In 2011, we estimate
that emerging Asia, the engine-room of the emerging markets growth locomotive, will
account for half of global GDP growth.
The nature and magnitude of the emerging economies growth story varies across and
within regions. A common theme is success in capturing gains from globalization created
by technological changes and trade-policy liberalization of the past two decades. In China,
explosive growth in trade-related industries has been multiplied by the breakneck pace of
urbanization that has accompanied rapid industrialization. Chinas urbanization is far from
complete, while Indias is, in our opinion, on the cusp of making itself felt as a global driver
comparable to Chinas (India The next commodities powerhouse, 9 November 2010). Not
only will urbanization transform India into a commodities-market participant of the first
This section draws heavily upon Advanced Emerging Markets: The Road to Graduation, by Piero Ghezzi, Eduardo
Levy-Yeyati, and Christian Broda, 5 October 2010.
10 February 2011
29
rank, it will launch India on the self-reinforcing process of urbanization and demand growth
that is playing out in China.
In both China and India, the forces that lay behind the ongoing growth episodes are powerful
and, in important respects, self-reinforcing. Rapid growth in manufacturing (China) and
services (India) is creating employment and raising living standards in the urban sector, thus
increasing the demand for urban space and the associated amenities; places to live, places to
shop, roads to get people from one place to the other, communication infrastructure, all the
things that make a modern city, all being built at a breakneck pace and on a huge scale. And
of course, the people who are doing all of this building are themselves earning income that
further contributes to the demand for urbanization.
The Asian growth explosion
creates opportunities, and
some challenges, for other
emerging market economies
The Asian growth explosion has created enormous opportunities, and some challenges, for
emerging market economies elsewhere. Other emerging Asia economies have found new
opportunities in supplying rapidly growing Chinese demand and taking their place in the export
production chain. Commodity-producing economies have benefited from booming demand for
their exports. But unlike commodity cycles of the past, we think this one is grounded in an
Asian development process that will be in place for a decade or more, not a few calendar
quarters. And the development opportunities provided by high commodity prices are only part
of the story; much of the emerging world stands to benefit from still-favourable demographic
fundamentals, and in many cases development opportunities created by still-recent economic
and financial reforms. One need only see the transformation of housing finance in countries
Figure 2: reflected in market outperformance
Figure 1: EM growth outperformance

40%
400
35%
350
MSCI World
300
CRB
GEMS USD
30%
25%
250
20%
15%
200
10%
150
5%
100
0%
1990
MSCI EM
1993
1996
1999
2002
2005
2008 2011F
EM GDP (% World)
50
0
Jan-04
Jan-06
Jan-08
Jan-10
Source: Bloomberg, Barclays Capital
Figure 3: Urbanization China and India
Figure 4: Investment/GDP China and India
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1960 1966 1972 1978 1984 1990 1996 2002 2008
60%
China
India
50%
40%
30%
20%
10%
0%
China
Source: World Bank
10 February 2011
India
1978 1982 1986 1990 1994 1998 2002 2006 2010

30
such as Brazil and Turkey, where it was historically stunted by financial instability, to appreciate
the scope for economic growth that has been created by stabilization and reform, long after
financial markets have learned to take stability for granted.
To be sure, booming commodity sectors pose challenges as well as opportunities for commodity
economies worried that more employment-intensive manufacturing production may be
crowded out by the commodities boom. Some emerging manufacturers, such as Mexico, have
found themselves in a difficult competitive relationship with Chinas export juggernaut, rather
than the more complementary relationship that many other economies enjoy.
Challenges and risks
to the EM growth story
While we believe that the drivers of Chinese and Indian growth are powerful and longlasting, each economy faces challenges and risks. The sheer scale of Chinas penetration of
global markets means that, in many sectors, there is limited scope to grow by capturing
additional global market share; over time, China will need to rely increasingly on domestic
demand and new, more technology- and innovation-intensive sectors. These pressures are
compounded by a gradual exhaustion of the grievously under-employed rural workforce
that was previously willing to come to the cities for very low wages; a Lewis moment that
will likely be compounded in the near future by a remarkably abrupt demographic
transition 2. India will need to find ways more adequately to supply its dynamic private
sector with the public infrastructure that it requires to continue to grow. Other emerging
market economies face their own challenges and risks, and some will occasionally stumble
in the years to come. On balance, though, to the extent that one can generalize about
emerging markets, we think the next decade holds more opportunities to deepen and
broaden their growth story than threats that it will end, a diagnosis that stands in sharp
contrast to the more clouded outlook for major industrial economies.
Reduced risk
The ability of EM to weather the
recent crisis changes the nature
of the asset class dramatically
Three critical changes:
The transformation of the emerging market economic space from problem children on the
periphery to engines of world economic growth is generally accepted by most investors.
However, the ability of many EM countries (primarily in EM Asia and Latin America) to
weather the most severe financial crisis in seventy years illustrates another less wellappreciated transformation one that changes dramatically, in our view, the nature of this
asset class. In particular, the passing of such a demanding test suggests that as developed
economies recover from the financial crisis, which could take years, the relative ex-ante
Sharpe ratios of a subset of EM assets should be more attractive than at any time in the
recent past. That is, EM-Asia and LatAm have been able to reduce their economic betas
to G7 countries without having to give up much of their alphas the opposite of what has
happened in most developed countries.
This view is predicated on three critical (and, in our view, long-lasting) changes.
macroeconomic stability,
reduced dependence upon
After the hard lessons of chronic inflation in the 1980s and financial stress and crises of
the 1990s, local political systems embraced macroeconomic stability (notably through
fiscal responsibility and independent central banks) as a pre-condition for prosperity.
Financial stability facilitated the elimination of structural amplifiers of external shocks,

most notably the dependence on external finance and the associated currency
mismatches. As the political economy incentives behind pro-cyclical good-times
policies were partially controlled, the proceeds of the bonanza were saved (in the form
of deleveraging, de-dollarization of public liabilities and accumulation of foreign assets).
The successful response to the global financial crisis confirmed the effectiveness of
these large liquid war chests, as well as the absence of skeletons in the books of EM
Asian and Latin American corporates and governments.
external finance, and the rise of

China as an EM growth driver
See Arthur Lewis (1954) Economic Development with Unlimited Supplies of Labor, Manchester School of
Economics and Social Studies, Vol. 22, pp 139-91. At an early stage of development, the growing sectors of the
economy face an unlimited supply of labor as they absorb labor from the subsistence sector.
10 February 2011
31
Last but not least, we believe China has emerged as a potent driver of other EM
economies, creating an element of economic diversification for economies that had
previously been highly dependent upon advanced-economy growth. Moreover, we
believe that it can sustain high levels of growth in the coming five years (Chinas global
significance: Economy vs markets, 27 September 2009).
5
Credible monetary policies,

paired with fiscal discipline and
reserve accumulation, reduced
the exposure to the global crisis
Progress on the policy and

financial dependence front
evolved very differently in each
of the EM regions
The dependence of EM countries

on global growth has shifted
toward China, away from G7
While exceptions can be found, emerging market economies responded to the turbulent
1990s by enacting stability-oriented policy frameworks. Monetary policy credibility
improved dramatically after the chronic inflation of the 1980s (Figure 5), and fiscal
discipline and the accumulation of reserves in good times allowed for an unprecedented
policy autonomy during the crisis, which helped reduce the depth and length of recessions
by limiting the scope for second-round effects. The credibility of these policies paved the
way for counter-cyclical fiscal and monetary packages when necessary.
Such credibility also facilitated a strategy of debt de-dollarization and de-leveraging (including
through reserve accumulation) that improved net debt ratios and liquidity coverage
dramatically. 3 Leaning-against-the-wind intervention, coupled with conservative liability
management, were (and remain) the mark of EM central bank policy in the 2000s (see Kiguel,
A. and E. Levy Yeyati, Fear of appreciation in emerging economies, Vox EU, 29 August 2009).
As a result, the currency mismatches that had been such disruptive shock amplifiers are
virtually gone in Asia or Latin America and, with them, the pernicious balance sheet effects
associated with depreciation of the local currency. The elimination of these vicious-circle
dynamics has allowed countries to exploit exchange rate flexibility as a countercyclical shock
absorber, further reducing cyclical output volatility, particularly in the downturn.
3
A final structural change of fundamental importance is the growth of economic linkages

between China and other emerging market economies, which has made China an
important driver of EM growth, over both secular and cyclical time-frames. In previous work
(Advanced Emerging Markets, Part I: A reassessment of an asset class, 5 October 2010), we
conducted a simple statistical analysis to quantify this realignment. This showed that EM
GDP betas to the G7 are high and reasonably stable since 1994, but when China is added as
a driver of the EM cycle, the estimated importance of China grows significantly in the post2000 period, while the G7s role declines dramatically especially for emerging Asian and
commodity-exporting economies. Of course, this introduces a source of risk for emerging
economies, which are much more exposed to developments in China than they were 10
years ago. But it also introduces an important element of diversification, which paid off
handsomely in the aftermath of the 2008 financial crisis.
Figure 5: Low inflation and better fiscal (debt/GDP) ratios

% y/y
% GNP
Figure 6: Saving the bonanza building the liquidity war chest

20%
50%
16%
40%
25
12%
30%
60
20
8%
20%
40
15
4%
10%
20
10
120
35
100
30
80
0%
0%
1985 1988 1991 1994 1997 2000 2003 2006
EM: inflation (lhs)
EM: public external debt (rhs)
Source: World Bank, Barclays Capital
1993 1995 1997 1999 2001 2003 2005 2007

Reserves over GDP (median)
Reserves over total external debt (median, RHS)
Source: BIS, Barclays Capital
In Asia, where sovereign debt ratios remain small or non-existent, the precautionary motive for reserve accumulation
could be seen as a hedge for private foreign liabilities (in fact the triggers of the Asian financial crises of the 1990s).
10 February 2011
32
Higher economic Sharpe ratios

By diversifying the external risks that face them and providing many EM countries with the
capacity to enact countercyclical policies in bad times, these structural improvements have
allowed many EM countries to become less sensitive to growth in developed countries
without having to reduce their average growth rates significantly. Figure 7 shows this basic
concept. The relative risk-adjusted average growth (the economic Sharpe ratio) between
EM and developed economies has more than doubled. It went from 0.75 = 1.16/1.54 prior
to 2001, to 1.79 = 1.22/0.68 since then.
This allowed EM to undertake

countercyclical policies for the
first time
Partly for these reasons, the economic damage associated with the global financial crisis of
2008 was short-lived in most emerging market economies, and negligible in a number of
them. EM financial assets sold off along with their industrial-country counterparts, but not
disproportionately. Figure 9 shows that the sell-off in emerging market sovereign debt
was comparable to that of the US high-grade market, both of them outperforming US highyield dramatically.
Figure 7: The end result a better relative growth Sharpe

Growth rate
(EM median)
Figure 8: that is expected to persist

12
G7 median
10
Period
Early
Late
Early
Late
Mean
4.20%
3.68%
2.10%
1.20%
Vol.
3.77%
3.17%
1.30%
2.24%
Skew
-0.99
-0.64
-0.71
-1.92
Kurtosis
0.60
-0.20
0.68
4.19
Sharpe Ratio
1.16
1.22
1.54
0.68
-2
Poverty headcount
(at 2$ PPP)
28%
24%
n.a.
n.a.
-4
Income share of the

lower quintile
6.9%
7.5%
7.6%
7.9%
-6
Q1 80
Q1 85
Q1 90 Q1 95
Develoved
Q1 00 Q1 05 Q1 10
Emerging
Figure 9: The crisis brought no skeletons
Figure 10: and no intra-EM contagion
bps
1400
1600
Spread: US HY less EM Soverign

Spread: US HY less US IG
1400
1200
1200
1000
1000
800
800
600
600
400
400
Argentine
default
Ecuadorian
default
200
200
0
Jan-06
Russian
default
Oct-06
10 February 2011
Jul-07
Apr-08
Jan-09
Oct-09
Jan-98
Jan-01
Jan-04
Jan-07
Emerging Markets Stripped Treasury Spread (bp)

33
The decline of EM-to-EM contagion

EM-to-EM contagion
continues to decline
This is all the more noteworthy because the 2008 crisis did lead to financial crisis in several
countries in EMEA, which included old-fashioned capital flight and currency collapses. This
highlights the fact that other EM economies were spared, not by some magical virtue of
their EM status, but because their economic structures and policy frameworks rendered
them less vulnerable. It also highlights the decline in EM-to-EM contagion, which was so
intense during the Asian financial crisis and the Russian default, faded dramatically in the
2001 Argentine default and Brazils 2002 Lula panic, and was largely absent in 2008.
Although EM economies and assets remain coupled to the world economy and financial
markets, and are likely to remain so for the foreseeable future, we think the days are gone in
which EM assets are confronted with indiscriminate selling because some faraway EM
economy found itself in trouble.
In short, we take issue with those who regard the pre-2008 EM boom as a fluke of the Great
Moderation and the commodity boom. It is true that favourable terms of trade have
benefited commodity exporters, and played some role in the post-crash recoveries of
commodity exporters. But emerging market economies have been strengthened by a
decade or more of reform and economic transformation. We think it is the lasting,
structural evolution in economic policies and local markets that explains the resilience of
most emerging economies to the global financial crisis.
Some fine print

Risks of policy backsliding
seem limited to us
That is, of course, a very sweeping statement and all such statements deserve qualification.
The first is that, as the disclaimer says; past performance does not guarantee future results. It
is certainly possible that some well-run EM economy could become poorly-run in the years to
come. As investment strategists it is our job, in part, to keep a sharp eye out for such things.
But for now, the risks seem limited. In general, the social consensus in favour of careful
economic policies was created in response to economic crises that have not been forgotten,
and the temptation to indulge in policy adventures is correspondingly attenuated in most
emerging economies. And for any EM policymaker tempted to get adventurous, the
excruciating consequences of policy mistakes now on display in so many industrial economies
provide a vivid object lesson in the virtues of cautious, stability-oriented economic policies
that is unlikely soon to be forgotten.
Figure 11: Why global investors could be skeptics: No decoupling (five-year rolling average correlation between EM and
world GDP); little improvement from rating agencies; and the same institutional divide as always
AAA
1.6
2.5
1.2
2.0
AA+
0.8
1.5
AA-
0.4
1.0
A-
0.5
BBB-
-0.4
0.0
BB-
-0.8
1984 1988 1992 1996 2000 2004 2008
EM Correlation
+- 1 std dev
Source: IMF, World Bank, Barclays Capital
10 February 2011
World Bank institutional indicators
-0.5
96 98 00 02 03 04 05 06 07 08
LatAm
Emerging Asia
Eastern Europe
Developed
Note: Average of World Banks estimated institutional quality

indicators, weighted by the inverse of their standard error.
GDP Weighted, Overall S&P Ratings
B1998 2000 2002 2004 2006 2008

Rating LatAm
Rating Asia
Rating EMEA
Rating G7
Source: S&P, Barclays Capital
34
Does all this imply that (at least some) EM countries have already graduated to the
developed world? Well, no. Many EM economies still preserve incomplete convertibility,
which many would identify as a characteristic of an emerging economy, as the recent Tobin
tax on capital inflows introduced in Brazil reminded the enthusiastic investor. Moreover, the
institutional indicators compiled by the World Bank record little progress in recent years
(and reveal a substantial gap vis--vis the G7), and income distribution and poverty
indicators still lag the G7 economies which may help explain why, aside from the inertial
nature of rating agencies, EM credit ratings remain below industrial economies.
But not all emerging market
economies are alike
We also need to acknowledge the heterogeneity of the emerging world, which we have so far
suppressed in order to characterize positive changes in the norm. In reality, of course, the
emerging market label lumps together some of the most sophisticated and competitive
economies in the world (Hong Kong, Singapore, the Czech Republic) with some of the poorest
and least competitive. It lumps together one of the largest economies in the world with a great
many of the tiniest. It contains economies with state-of-the-art policy frameworks, and others
where it is hard to discern the existence of any policy framework at all. Generalizations are
possible, as long as one recognizes that there are glaring exceptions to the rule, small though
these exceptions generally are, in the overall market. Any real investor decision needs to account
for the distinctive features of individual markets as well as commonalities.
The market landscape who makes up the market?

Having acknowledged that there are exceptions to the norm, we feel that we should quantify
the importance of those exceptions in the overall investment landscape. In Figure 12 we
provide a rough characterization of the economies that figure in emerging debt or equity
markets, and divide them into three groups. The first is the group of Advanced Emerging
Market economies that we recently highlighted for their exceptional promise in terms of high
and stable growth. (See Advanced Emerging Markets: The Road to Graduation, 5 October
2010, for an extended discussion and explanation of the ranking process that lies behind this
breakdown.) The second is a group of economies that did not make this list, but where the
policy framework is solid, and the outlook for economic growth is promising. For each of
these economies, we feel that the positive economic trends described above fully apply. Last,
there is a list of economies where question marks about the economic structure and/or policy
frameworks leave room for doubt about the medium-term economic and financial outlook,
doubts of the sort that were once considered the norm in emerging markets. In the table we
characterize the importance of these countries and groups of countries in terms of economic
size (GDP) and market significance (market capitalization of the MSCI for equity markets, the
Barclays Capital EM sovereign for external (USD) debt, and the Barclays Capital EM Local Debt
index for local bond markets).
Of course any such grouping is, to some extent, arbitrary in weightings applied to the different
characteristics and the cut-offs selected; in reality, country performance is multidimensional
and more continuous than categorical. Moreover, the list is not immutable; we fully expect the
group of Advanced Emerging Economies to grow over time. And one might view the recent
history of EM as, in substantial part, a graduation of the majority of economies from the
traditional EM category to something more promising; no law of nature prevents the
remaining countries in that category from following the same trajectory.
The traditional EM category is
small in most respects, but a
significant presence in the
external debt market
A couple of points emerge clearly from the table. First, while the list of countries that we have
placed in the Traditional EM category is fairly long, they are a small minority of the overall EM
universe, accounting for only 16% of GDP, 2.5% of the MSCI equity market capitalization, and
just above 5% of the Barclays Capital EM local debt index. They are, however, a significant part
of the external debt market, accounting for roughly 30% of the Barclays Capital index, with the
majority of this due to four large issuers: Russia, Argentina, Venezuela, and Hungary.
It makes perfect sense, of course, that Traditional EM economies would be underrepresented in equity and local debt markets, but over-represented in old-fashioned
10 February 2011
35
external debt markets, since these countries have in most cases not established the policy
track record that would permit them to issue on a large scale in local currency, nor the track
record for economic growth that would make them an appealing equity market. The major
exceptions here are Russia, whose equity market is roughly 7.5% of the EM total, and
Hungary. Hungary is a recently fallen angel in global debt markets, whose relatively large
and deep domestic debt market is a legacy of years when the countrys policy framework
inspired more confidence than it does now.
Figure 12: The market landscape Who is who?
USD
GDP
MSCI
Advanced emerging economies

Asia
China
Hong Kong
Korea
Singapore
Taiwan
Czech
EEMEA
Israel
Poland
South Africa
Brazil
LATAM
Chile
11,269
5,866
230
1,010
227
432
225
218
487
363
2,007
204
Other well-managed EM
Asia
India
Indonesia
Malaysia
Philippines
Thailand
EEMEA
Abu Dhabi (UAE)
Bulgaria
Morocco
Qatar
Turkey
LATAM
Colombia
Mexico
Panama
Peru
Uruguay*
Traditional EM
Asia
EEMEA
LATAM
Total
Pakistan
Vietnam
Egypt
Hungary
Ivory Coast*
Lebanon
Lithuania
Romania
Russia
Ukraine
Argentina
Ecuador*
Venezuela
External
debt
Local
debt
5,844
1,390
592
859
335
642
38
124
132
440
1,107
185
115.5
1,221
486
7.7
351
99
76
46
98
44
45
114
71
105
4
91
115
155
127
106
80
5,779
1,570
720
240
189
310
240
49
92
127
735
291
1,035
27
155
40
2,536
913
215
278
64
190
53
1
31
90
185
136
315
196.4
852
399
42
76
26
60
123
3,311
175
102
248
127
61
39
35
185
1,506
135
432
62
204
864
23
16
41
24
20,359
9,244
64
8
1
11
718
12
11
48.6
10.7
48.3
20.6
27.5
4.5
2.4
2.0
13.1
49.7
13.5
38.0
8.9
10.3
6.0
67
49
106
27
135.3
1.1
1.8
1.5
15.4
0.9
9.9
10.5
6.3
34.6
6.8
23.5
0.6
22.4
117
447.2
2,189
25
34
57
0
CDS
139
79
129
106
94
257
154
86
142
108
109
95
105
117
516
797
329
269
370
1,200
317
254
295
141
465
534
750
984
Note: * Our measure of sovereign credit risk is derived from the following bonds: Ecuador 2015, Ivory Coast 2032 and
Uruguay 2015. GDP and market cap are measured in billion USD, CDS in basis points as of January 14, 2011.
Source: Haver Analytics, Bloomberg, Barclays Capital
10 February 2011
36
where they tend to attract

higher credit risk premia
But in other markets, traditional

EM economies are a small part
of the landscape
Because the ranking in Figure 12 is designed to assess the outlook for rapid growth with
stability, it captures more than pure country-risk concerns. As a result, the traditional EM
category is not solely occupied by weak sovereign credits, but also includes some countries
(notably Russia) where sovereign credit risk (as measured by 5-year CDS spreads) is
relatively low, despite an institutional and policy framework that raises some doubts about
the outlook for strong and sustained economic growth. In general, though, the traditional
EM economies are viewed as more precarious sovereign credits, with an average CDS
spread of over 500bp, compared with 123bp in the intermediate category and 99bp in the
AEM category.
By most measures, then, we feel justified in treating the countries that still exhibit traditional
EM weaknesses as unrepresentative of the countries that make up the asset class. That does
not mean that they are uninteresting from an investment perspective. Arguably, there is much
more upside potential in countries that have yet to establish solid, pro-growth policy
frameworks. However, these countries are best treated as an idiosyncratic and diverse
collection of stories, rather than anything resembling an asset class.
The market landscape A decade of outperformance

Past performance does not guarantee future results but it does establish the initial
conditions. It also conditions expectations, rightly or wrongly. While the past is surely an
incomplete guide to the future, it would be a mistake to ignore entirely past performance,
since markets rarely exhibit complete discontinuities with previous behaviour. So before
turning to the outlook, it makes some sense to take a critical review of the markets history.
A decade of EM asset-market outperformance

The most salient element of that history is, in our view, the long-run outperformance
exhibited by major emerging markets, and the most important question that we intend to
address below is how much of that outperformance is likely to continue in coming years.
EM equities have delivered the
largest outperformance
EM equity markets have exhibited the most dramatic outperformance, benefiting as they
have from strong economic growth (relative to the industrial economies and, we suspect,
relative to investors expectations in the early part of the decade), currency appreciation,
and a positive re-rating of EM assets. In the 12 years since early 1999, the total return on
the MSCI EM benchmark has delivered nearly four times the cumulative return in
developed-market equities, an average outperformance of over 10% per year. Granted, this
Figure 13: EM equities A decade of strong outperformance
Figure 14: External debt market performance Converging

to developed-market norms
4.5
2.0
4.0
1.8
3.5
1.6
3.0
1.4
1.2
2.5
1.0
2.0
0.8
1.5
0.6
1.0
0.4
0.5
0.2
0.0
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Total return, MSCI EM/MSCI World

Source: MSCI, Barclays Capital
10 February 2011
Jan-11
0.0
Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10
EM/HY
EM/HG
EM/UST
Note: Cumulative returns on BarCap EM sovereign index relative to those of the

high-yield, high-grade, and US Treasury indices. Source: Barclays Capital
37
was not an outstanding decade for developed-market equities, but the total return on
emerging market equities of over 12% per year stands out in absolute, as well as relative
terms. EM equities suffered disproportionately, though briefly, during the 2008 global
financial crisis, but have shown little evidence of slowing their trend appreciation since then.
But old-fashioned EM debt also
performed very strongly in the
past decade.
with the magnitude of the

outperformance trending down
in recent years
EM equity volatility is no longer

significantly higher than in
advanced markets
External debt markets have also outperformed their industrial-country counterparts, though
debt markets being what they are, the scope for outperformance has of course been
quantitatively more limited. EM debt markets underperformed US Treasury markets and
high-grade credit markets in the early part of the 2000s, burdened as EM markets were by
traumatic emerging market crises including the Argentine default and the panic
surrounding the 2002 election of Lula as President of Brazil (Figure 14). After 2002, EM debt
entered an extended period of outperformance against US Treasuries, high-grade, and
high-yield credit markets, as investors re-rated emerging sovereign credits in response to
the improving policy and economic trends discussed above.
Since its rebound from the global credit crisis, EM bond markets have outperformed US
treasuries at a modest pace, treaded water against US high-grade, and have recently
modestly underperformed US high-yield credit markets. As we discuss below, this reflects
the fact that the re-rating of EM sovereign credit is well advanced, and while further rerating is possible, we see the scope for continued external debt outperformance of the
magnitude observed during the asset classs golden years 2002-07 as limited.
The high ex-post return on EM equities came with some risk for investors, though the
realized risks were probably substantially lower than investors subjective assessments in
the early years of the last decade. For much of the past decade, EM equities exhibited higher
volatility than developed markets, though in the past several years the gap has
closed substantially.
As we have noted, EM equities were also hit much harder during the 2008 financial
collapse, although they recovered very quickly and have since resumed their earlier
outperformance. It remains an open question whether the intensity of the 2008-09 sell-off
of EM assets reflects an ongoing sensitivity of EM asset markets to global financial disorder,
for which investors should be compensated, or a historical mistake by investors who
underestimated the resilience of EM economies. Our own view is mainly the latter, and if
there is another realization of global tail risks such as the one we experienced in 2008, we
doubt that EM asset markets will sell off in such an exaggerated way.
Figure 15: Volatility has been higher in EM equity markets, but the gap is closing
70%
60%
50%
40%
30%
20%
10%
0%
Jun-00
Jun-02
Jun-04
Developed markets
Jun-06
Jun-08
Jun-10
Emerging markets
Note: 6-month historical volatility of total returns for MSCI EM and World indexes, computed using daily data.
Source: Bloomberg, Barclay Capital
10 February 2011
38
Its not the beta, its the alpha

Market betas remain high
That said, emerging asset markets are as integrated into global asset markets as their
economies are integrated into the world economic system. In financial markets, this
integration is reflected in correlations to the broader global markets within which they are
embedded. As Figure 16 and Figure 18 illustrate, betas of EM markets are fairly high to their
advanced-economy counterparts, and have shown no strong tendency to decline over time
(although the very high sensitivity of Latin equity markets has declined substantially over
the past decade).
But alphas are more interesting
Emerging asset markets should be interesting, not so much for low betas, as for their
alphas. Figures 17 and 19 provide estimates of beta-adjusted returns on EM equity and
external debt markets in recent years. Setting aside the short-lived market spasm in 2008,
EM outperformance has been the norm.
On a beta-adjusted basis, EM equity markets have recently been outperforming developed
equity markets at an annual rate of roughly 500bp. Latin America is the outlier here,
reflecting what we consider a temporary and cyclical underperformance of the Brazilian
equities that dominate the Latin index. EM sovereign debt has been outperforming US
treasuries and high-grade credit, at a declining rate, while slightly underperforming highyield credit, as that asset class continues to normalize from its extraordinary sell-off in the
global financial crisis.
Figure 16: EM equities High beta to global markets

2.5
Figure 17: but the alpha is more interesting

60%
EM equity betas to developed equities
EM equity alphas to developed equities
40%
2.0
20%
1.5
0%
1.0
-20%
0.5
-40%
0.0
Feb-06
-60%
Feb-06
Feb-07
Feb-08
EM
Feb-09
Asia
Feb-10
EMEA
Latam
Feb-07
Feb-08
Feb-09
EM
Asia
EMEA
Feb-10
Latam
Figure 18: EM debt market betas are high and rising
Figure 19: while outperformance is fading

60
EM external debt betas
1.2
EM external debt alphas
50
1.0
0.8
40
30
0.6
0.4
20
0.2
0.0
10
-0.2
-0.4
-10
-0.6
-0.8
Jul-07
-30
0
-20
Mar-08
10 February 2011
Nov-08
Jul-09
Feb-10
UST
HY
IG
Oct-10
-40
Jul-07
Apr-08
Dec-08
UST
Sep-09
HY
May-10
IG
39
Dissecting market performance

What are the drivers of
historical outperformance?
We need one last look backward before well feel comfortable looking ahead. When thinking
about the degree to which emerging asset markets can continue to perform in the years to
come, it pays to have a look at the drivers of past performance.
In external debt markets, this is about as straightforward as it gets; outperformance is a
matter of carry and spread compression. As Figure 20 illustrates, both have been important:
during the past decade, EM carry has been higher than high-grade carry, while the
convergence of spread levels from high-yield to high-grade levels has been a hugely
important driver of total returns. Although spreads on the Barclays index remain well above
those of the US high-grade index, it is notable that re-rating of the index has been uneven; a
small number of riskier credits (such as Argentina, Venezuela, and Ukraine) elevate the index
spread, while a substantial majority of countries in the index now trade very close to
investment-grade levels. This will be important to bear in mind when we assess the market
outlook, below.
In equity markets, re-rating

is part of the story
In equity markets, too, re-rating has been an important driver of market outperformance.
Less than a decade ago, EM price-earnings ratios were about half those of developed
markets (Figure 22). Since then, EM PEs have risen while advanced-economy markets have
de-rated; now, developing and developed market PEs trade within about a percentage point
of one another.
But this re-rating is not the end of the story; equity market history is more complicated and
interesting than that. Suppose we decompose equity market performance into three main
components, as follows:
(Q/P*) = (Q/E)*(ES/P)*(P/SP*)
Where:
Q = equity price in a common numeraire (since we are using the MSCI, the USD)
P* = The price level used to deflate the USD quantities (for example, the US CPI)
E = Earnings in USD (as they are reported by the MSCI. In what follows, we
consistently use trailing earnings rather than forward estimates)
S = The exchange rate, expressed as local currency per USD
P = The domestic price level for the equity market in question
Figure 20: External debt driven by high carry and spread

compression from high-yield to high-grade levels
Figure 21: Carry on the overall index reflects a small number

of high-yielding credits
3,000
2,000
1,800
2,500
1,600
1,400
2,000
1,200
1,000
1,500
800
1,000
600
400
500
200
0
Jan-00
Jan-02
Jan-04
US HY
10 February 2011
Jan-06
US HG
Jan-08
Jan-10
0
Jun-01
Jun-03
EM
Jun-05
Arg, Ven, Ukr
Jun-07
Jun-09
Other
40
Figure 22: Equity market performance has been driven in

part by a re-rating toward developed-market PEs
Figure 23: EMEA equity-market valuations have lagged Latin

America and Asia
40
40
35
35
30
30
25
25
20
20
15
15
10
10
0
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Developed World
Jan-10
0
Jan-00
Jan-02
EM
Source: MSCI
Jan-04
Asia
Jan-06
Jan-08
EMEA
Jan-10
Latam
Source: MSCI
The first term on the right side is the PE ratio, reflecting the discount that markets place on
equity market earnings. The second term is real earnings in local currency, and the third
term is the real exchange rate. A given equity market can thus outperform another either
because the market is re-rated, because earnings grow more rapidly than the other market,
or because the currency strengthens.
Its useful to understand which of these factors have been responsible for historical equitymarket outperformance because it bears on the sustainability of the performance going
forward. In particular, if equity market outperformance were predominantly due to a large
re-rating of emerging asset markets or an abrupt appreciation of the real exchange rate, it
may plausibly be regarded as a one-off with limited staying power. If, on the other hand, it
reflects rapid earnings growth that may plausibly be sustained in a high-growth economy,
then the case for sustainability is reinforced.
but earnings growth and real
exchange rate appreciation have
been more important
In Figure 24 we decompose emerging and developed equity market performance along

these lines, using the past 10 years. Ten years is a nice round number, and as good a
definition of long-run as we know, although this particular decade has the disadvantage
that it captures the height of the 1990s technology and equity-market bubble, and
subsequent bust. We nevertheless consider the results informative, so long as they are not
extrapolated naively into the future.
Over this period EM equity prices rose almost 7% per year more than the US CPI,
outperforming developed-market equities by more than 10%. EM PEs have also fallen from
2000 the equity bubble of the late 1990s was a global phenomenon but they fell
proportionately less than in developed markets, as investors gradually re-rated EM assets
relative to developed-market assets. But the bigger story of the past decade lies in the other
drivers of equity market performance. Real earnings growth and exchange-rate appreciation
contributed more than 9% to real equity appreciation, with real earnings growth contributing
a large majority of the total. (Assuming an average dividend payout of roughly 2.5%, this
would translate into a total annualized return of almost 12% over the decade.)
Figure 24: Drivers of equity price performance, 2000-10
Emerging
Developed
Difference
Real equity price (USD index/US CPI)
6.8%
-3.6%
10.4%
Price-earnings ratio
-2.2%
-4.6%
2.4%
Real earnings
6.7%
1.2%
5.5%
Real exchange rate
2.5%
----
2.5%
10 February 2011
41
We read these results like this. During the past 10 years, the relative performance of
emerging market equities has been abetted by a convergence of EM equity PEs toward
advanced economy levels. However, the rapid rise in real earnings and appreciation of the
EM real exchange rate were quantitatively much more important drivers of EM equitymarket returns. Actually, the role of growth is very likely even higher than in the
decomposition shown in Figure 24, in that an upward revision of investors expectation of
EM growth along with a decline in the perceived riskiness of EM assets is probably an
important reason for the compression of EM PEs toward industrial-country levels. This
highlights the importance of economic growth and exchange rates for long-run assetmarket performance. We therefore begin our assessment of the outlook with some
thoughts on these topics.
Is that all there is? Emerging asset market outlook

As we have seen, markets have re-rated emerging market equity and debt markets,
responding to the positive economic developments that we have described above. The
question naturally arises, is the good news fully priced in? What is the scope for EM asset
market outperformance? To address this question we need to turn back to economics
though with a forward-looking angle rather than the retrospective focus with which we
introduced this note.
In the beginning, there was economics

Our market outlook is based
on a growth forecast that
is consistent with
consensus views
Economic forecasting is a hazardous business, and long-run forecasting even more so. But
it is hard to imagine a coherent discussion of the secular outlook for asset markets that
does not contain some forecast of the outlook for growth and exchange rates even if the
risks surrounding that forecast are at least as important as the base case itself. What we
care about most are economic growth and trends in the real exchange rate over a medium
term of 5-10 years. Our forecasts of these by region and for the larger emerging economies
are presented in Figure 25. The broad outlines of the growth forecasts are at least
qualitatively in line with consensus, and should be broadly familiar to investors. Emerging
market economies are expected to continue to grow meaningfully faster than advanced
economies for the foreseeable future. Asia is expected to remain the growth leader,
propelled by near double-digit growth in China and India.
Figure 25: Medium-term economic projections

Real GDP growth (%)
Real exchange rate

appreciation (%)
Emerging markets
5.6
1.8
Latin America
4.3
-0.8
4.5
-1.6
Brazil
Mexico
3.0
-0.6
4.5
0.2
Poland
3.8
1.0
Russia
4.2
1.0
South Africa
4.8
-0.4
Turkey
3.8
-1.5
EMEA
Asia
6.4
3.2
China
9.0
3.5
India
8.5
5.0
Korea
4.4
2.1
Taiwan
4.8
4.0
Note: Regional aggregates are weighted by MSCI equity-market capitalization. Source: Barclays Capital
10 February 2011
42
and an approach to
exchange rates that
emphasizes the role of growth
and long-run convergence to
equilibrium valuations
As we have seen, we also need a view on the medium-term outlook for exchange rates. Our
approach to this issue is designed to capture two elements of the problem that we consider
central to the long-run investment problem facing investors. First, wealthier, more
productive economies tend to have stronger real exchange rates than poorer countries
(and, therefore, more rapidly growing economies tend, other things equal, to have more
rapid real exchange-rate appreciation). This is the famous Balassa-Samuelson finding.
Second, countries with undervalued exchange rates, in a sense that well define more fully
in a moment, tend to see more appreciation over relatively long periods of time than
countries that begin the period with over-valued currencies. This point is highly relevant
because different emerging market economies are positioned so differently in this respect,
with currency valuations quite stretched in countries like Brazil and Turkey, much less so in
countries like Korea, Poland, and Mexico.
In a nutshell, we first estimate the relationship between income and the real exchange rate
in a large cross-section of countries, using 2010 data, and again using data collected in
2000. (Figure 26 illustrates the relationship in the 2010 data.) Deviations from the trend line
provide us with a measure of real exchange-rate over- or under-valuation. We then
compare the 2000 deviations with those in 2010 to see whether there is in fact a tendency
for initially overvalued currencies to decline toward the Balassa-Samuelson norm. In fact,
there is, and we can use the data to estimate a typical speed of adjustment. (The estimated
speed of adjustment implies that roughly half of a measured over- or under-valuation tends
to be unwound over the course of a decade.) We combine our medium-term growth
forecasts to define the rate at which the equilibrium exchange rate is changing, and the
estimated speed of adjustment to define the rate at which the exchange rate should
converge toward this equilibrium. (For more a more detailed explanation of the approach,
see FX Valuation and Outlook: An absolute approach, 2 February 2011.)
The approach points to trend

exchange rate appreciation in
Asia, not so much in EMEA and
Latin America
The results make good sense, in our view, though they are quantitatively starker than we
may have thought. In all regions, rapid future growth suggests that equilibrium real
exchange rates will be rising over time. But in both Latin America and EMEA, exchange rates
have already appreciated enough so that only limited additional appreciation is likely over
the medium term of the next 5-10 years. The result for Latin America is heavily influenced
by Brazil, where our estimates suggest that the currency has overshot to the point that a
modest pace of real exchange-rate depreciation is more likely than appreciation, over the
medium term. The same is true for Turkey.
In Asia, on the other hand, the expected rapid growth and generally less stretched FX
valuations point toward considerably more medium-term upside potential for real exchange
rates, especially for China and India, where our estimates point toward real appreciation of
roughly 5-6% per year over the coming 5-10 years. In much of Asia, of course, exchangerate performance is heavily conditioned by activist currency policies that seek to prevent
rapid appreciation. While these policies have been successful in many countries, which
helps explain the generally favourable currency valuations, we believe that over the 5-10
year medium term that concerns us here, economic fundamentals will eventually prevail.
External debt A tale of two markets

External debt markets the
average is misleading
10 February 2011
With those economic preliminaries behind us, we turn now to the outlook for EM asset
markets, beginning with external debt. Barclays EM sovereign external debt index is
currently (19 January 2011) priced at an average spread of just over 250bp. This would
seem an appealing rate of carry, in light of the generally positive economic and credit story
that we have argued is the norm in emerging markets, and would suggest plenty of room
for further spread compression. However, in this case the average is a misleading statistic
that fails to convey the skewed and even bifurcated nature of todays EM external debt
market, and the risks and potential rewards contained therein.
43
The higher-quality majority of

the index trades at relatively
low spreads
and with a high correlation to

global credit markets
But it is a small asset class with

broad appeal and should remain
well supported, if unexciting,
in the years to come
Roughly 75% of the index carries a spread lower than the index average; in fact, more than
70% of the index is squeezed in a narrow range between the minimum (116bp for Brazil)
and 190bp (Russia). This large majority of the index comprises mainly countries that fit our
stylized description of a well-run, credit-worthy economy with solid growth prospects. At
the other end of the spectrum, 20% of the index carries an average spread of about 650bp,
but this comprises countries like Venezuela, Pakistan, Argentina, Hungary, Ukraine, and
Vietnam, where policy frameworks are still works in progress, and credit improvement of
the sort that drove the EM debt market in its golden years is far from assured.
Right now, the credits in the high-quality majority of the index trade with a very high
correlation among themselves, and with the broader credit markets. From a high-frequency,
mark-to-market perspective, they currently offer limited scope for diversification.
That said, we are not pessimistic about the outlook for the high-grade majority of the EM
sovereign debt market, as long as one is realistic about the magnitude of the further
outperformance that can be expected. Investors will likely earn the carry that is on offer, and
we think there is room for further spread compression over time. There is no law of nature
that requires EM sovereigns to trade at triple-digit spreads to US Treasuries; several have
traded meaningfully tighter in the not-so-distant past. As of this writing, in CDS markets
some six sovereigns (including Hong Kong, which we include among emerging markets
though it does not enter the external debt indexes) and 25 of 125 corporates in IDX.NA.IG
now trade inside the United States government. Moreover, while high-quality EM sovereign
credits now offer limited diversification from a high-frequency, mark-to-market perspective,
they do provide longer-run diversification of corporate-credit specific risks such as a trend
toward shareholder-friendly re-leveraging, or adverse regulatory developments in the
advanced economies.
Moreover, this is a very small set of assets that fits naturally into the mandate of some
very large investors; the outlook for the asset class thus seems positive even if, looking
forward, were likely to be measuring its outperformance in basis points, not percentage
points. But it is not the asset class that will capture the upside potential in the emerging
market growth explosion.
EM high-yielders offer more

upside potential,
but also higher risk
The high-yielding fringe of the external debt market certainly presents more potential
upside, with correspondingly higher risks, but in our view these credits should not be
considered a homogeneous asset class but instead, like Tolstoys unhappy families, a
collection of societies with idiosyncratic challenges and very diverse prospects. Investors
who play in this sandbox should probably invest on the basis of these idiosyncrasies, rather
than adopting a broad thematic approach. Moreover, exciting though these assets may
Figure 27: External debt spreads are highly skewed
Figure 26: Higher income, stronger real exchange rate

log PPP REER 2010
1200
0.2
1000
Distribution of external debt spreads
800
-0.2
600
-0.4
400
-0.6
200
-0.8
3.4
3.6
3.8
4.0
4.2
4.4
log PPP GDP per capita 2010

10 February 2011
4.6
4.8
0
10
20
30
40
50
60
70
80
90
100
44
occasionally be for those who follow them, we have to recognize that we are speaking here
about a sliver of an asset class that is itself a small and shrinking fraction of global fixedincome markets. This is not the stuff of which global investment themes are made.
Local debt markets Joining the mainstream

Local bond markets
are more promising
and can capture some

elements of the positive
EM outlook
but this is not the asset class

best placed to benefit from
EM growth
The past six years witnessed a revolution in EM sovereign finance, as international investors
acceptance of local bond markets grew from the adventurous fringe to the mainstream of
emerging fixed-income asset markets. A more promising asset class in many ways than
old-fashioned external debt, local sovereign markets are significantly larger and fastergrowing than the external bond market, and offer an appealing way to diversify exposure to
the dollars, yen, and euros that most investors have up to their eyebrows. They exhibit a
lower beta to global asset markets and, for active investors, a correspondingly greater
potential to tease alpha out of the differentiated monetary and FX stories that comprise the
asset class (see Going Local, part IV of Advanced Emerging Markets: The Road to
Graduation, 5 October 2010).
Local bond markets also offer some forms of exposure to the relatively upbeat outlook for EM
economies. Through local markets, investors can benefit from consolidation of inflation,
where such consolidation is not yet accomplished or fully priced in to local yield curves. Local
yield curves should also provide exposure to EM sovereign credit fundamentals that are
generally substantially more benign than in the advanced economies. Investors can also gain
exposure to the real exchange-rate appreciation that tends to come with rapid economic
growth, at least if that appreciation is via the exchange rate rather than domestic inflation, or if
investors have access to inflation-linked instruments that exist in several EM bond markets.
We are as supportive of this asset class as anybody we know (for some recent thoughts, see for
example, EM and inflation-linked bonds: Keeping it Real, 10 November 2010, and Local vs
external debt under a new norm, 25 October 2010). But if, as we think, the secular driver of
asset markets going forward is likely to be growth, rather than an economic stabilization that is
already largely accomplished and to a large extent priced in to markets, we think that neither
external nor local fixed income is likely to be the investment story of the coming 5-10 years.
EM equities Is all the good news priced in?

As the largest asset class by far, and the one most directly linked to economic growth,
equity markets are the natural place to seek opportunities to gain exposure to the emerging
market growth theme. Other people have, of course, already had this thought and acted
upon it, and the question that arises is the degree to which the likely economic
Figure 29: As a result, estimated excess returns are positively
correlated with growth forecasts
Figure 28: PEs are not highly correlated with growth

forecasts
Estimated equity risk premium

14%
PE ratio
30
12%
25
10%
20
8%
15
6%
10
4%
5
0
0%
2%
0%
5%
10%
15%
0%
Projected earnings growth rate

10 February 2011
5%
10%
15%
Projected earnings growth rate

45
outperformance is reflected in current markets. Is all the good news priced in and all the
value squeezed out of EM equity markets?
We approach the question in a conventional manner. We begin with the assumption that
equity prices are the present value of expected future dividends, which results in the
following simplified relationship:
A conventional dividenddiscount model
(P/E) = div*(1+g)/(r + rho g)

Where: (P/E) is the equity markets (trailing) price-earnings ratio
div = dividend payout ratio (dividends/earnings)
g = medium-term real earnings growth rate
r = real return on a safe asset, usually sovereign debt
rho = the equity risk premium, or equivalently, the expected return in excess of
the yield (r) on a safer asset, that is implied by market pricing of the expected
future stream of earnings and dividends.
The theory is straightforward, even primitive; the difficult part is coming up with forwardlooking estimates of div, g, and r which allow us to compute the implied excess return, rho.
We explain our approach in the appendix to this chapter and list the main inputs and results
in Figure 30. The main conclusions are as follows.
Figure 30: Projected equity-market returns
MSCI mkt cap
PE
ROE
div
ERP
H vol
Sharpe
Emerging markets
9,362,990
100.0%
16.1
15.48
0.378
8.0%
2.53%
7.99%
13.1%
0.611
Latin America
1,820,347
19.4%
17.2
16.98
0.384
6.9%
2.57%
6.84%
17.9%
0.382
Brazil
1,119,021
61.5%
13.8
17.90
0.385
6.6%
2.56%
7.01%
21.0%
0.334
Chile
174,384
9.6%
21.4
10.77
0.379
10.6%
2.22%
10.37%
16.9%
0.613
Colombia
137,654
7.6%
23.5
9.74
0.494
6.7%
2.60%
6.37%
23.8%
0.267
Mexico
318,128
17.5%
23.9
18.07
0.347
4.8%
2.64%
3.66%
15.4%
0.237
Peru
EMEA
59,989
3.3%
21.0
28.28
0.351
11.9%
2.56%
11.21%
23.6%
0.476
1,956,965
20.9%
12.6
16.44
0.315
7.0%
2.89%
6.25%
17.2%
0.364
0.877
Czech Republic
40,918
2.1%
9.9
15.51
0.632
8.0%
2.28%
12.61%
14.4%
Egypt
40,946
2.1%
17.4
22.24
0.531
2.8%
4.48%
1.46%
15.3%
0.096
Hungary
24,818
1.3%
12.2
20.35
0.212
5.3%
4.89%
2.28%
21.7%
0.105
Israel
125,533
6.4%
15.2
13.66
0.387
7.8%
2.56%
8.02%
17.3%
0.463
Poland
131,721
6.7%
14.1
15.08
0.411
6.8%
2.99%
6.93%
14.9%
0.466
Russia
756,119
38.6%
8.3
15.43
0.152
7.9%
2.91%
6.98%
19.5%
0.358
South Africa
423,331
21.6%
18.9
18.07
0.428
5.5%
2.82%
5.08%
12.6%
0.403
Turkey
Asia
China
187,399
9.6%
10.8
16.73
0.292
6.6%
3.01%
6.52%
19.8%
0.328
5,585,678
59.7%
16.9
14.65
0.397
8.8%
2.39%
8.95%
13.7%
0.654
1,445,411
25.9%
14.6
15.62
0.333
10.2%
2.27%
10.39%
16.0%
0.648
Hong Kong
626,199
11.2%
22.9
9.62
0.533
5.3%
1.81%
5.94%
14.3%
0.414
India
847,811
15.2%
22.4
19.79
0.212
13.4%
2.74%
11.72%
16.7%
0.700
Indonesia
202,801
3.6%
19.0
24.92
0.408
9.6%
3.22%
8.75%
22.8%
0.384
Korea
893,804
16.0%
12.1
12.86
0.172
7.0%
2.42%
6.15%
13.2%
0.464
Malaysia
290,077
5.2%
18.1
12.79
0.420
9.6%
2.25%
9.90%
8.5%
1.171
Philippines
62,871
1.1%
17.5
14.67
0.414
8.2%
2.97%
7.83%
19.4%
0.404
Singapore
339,108
6.1%
16.0
12.75
0.433
8.4%
2.25%
9.10%
11.1%
0.821
Taiwan
643,400
11.5%
16.1
10.70
0.922
5.5%
2.25%
9.27%
12.4%
0.745
Thailand
189,226
3.4%
14.8
16.76
0.412
6.9%
2.53%
7.34%
19.1%
0.385
Note: H vol is historical volatility computed with daily data over a six-month window. g refers to earnings growth measured in US dollars and deflated with the US
CPI. R is the real return on a USD-denominated government obligation. ROE and div are the estimated return-on-equity and dividend-payout ratio, averaged over the
past five years. Market capitalization and PEs are December 2010 values.
10 February 2011
46
Our growth forecasts imply strong EM equity outperformance

Weak correlation between
projected earnings growth
and PEs
points toward a positive

relation between projected
growth and estimated future
excess returns
Estimated returns are

comparable to the
past decades returns
First, there is only a weak correlation between our projection of growth and PEs in the main
EM equity markets (Figure 28); at least by this measure, equity markets do not appear to be
pricing the growth outlook very aggressively, or if they are, they are using quite different
growth estimates than ours. It follows almost necessarily from this that there is a strong
correlation between our estimates of excess equity returns and our forecasts of economic
growth (Figure 29).
Second, it does not appear to us that the scope for equity-market performance is much
reduced by comparison with the past decades strong record. For EM as a whole, we
estimate an equity risk premium of roughly 8%, which implies a total expected return
(above inflation) of about 10.5% over the long term. For Asia, our estimate of the risk
premium is nearly 9%, and the projected total return 11.3%.
In a world of much-diminished return expectations, and in light of the re-rating of EM equity
markets that has already taken place over the past decade, these estimates look very high
indeed. So before we delve into the details, we think we should put them in historical
perspective, and illustrate more clearly what one needs to believe about the future to accept
this as a plausible forecast. We do so with the help of Figure 31, which compares the past
10 years with our outlook for 2010.
Figure 31: Deconstructing MSCI EM total returns Past and projected
Total returns (after inflation)
2000-10 (%)
Projection (%)
9.3
10.5
Dividends
2.5
2.5
Capital gains
6.8
8.0
Re-rating (P/E)
-2.2
---
Local currency earnings
6.7
6.2
Real exchange rate
2.5
1.8
reflecting an outlook for

growth that is comparable
In 2000-10, EM equity markets earned a total return of 9.3% after inflation. 4 This comprised
dividend income (assumed to be re-invested) of 2.5% and real capital gains of 6.8%.
Assuming dividend income remains about 2.5% (reflecting a dividend payout ratio of just
over 40% and a price/earnings ratio of about 17), our 10.5% total return projection is
consistent with real capital gains of about 8% per year. Our economists tell us to expect real
exchange rate appreciation of about 1.8% per year in the medium term, which requires real
earnings to grow about 6.2% per year in local currency terms.
We have a couple of benchmarks against which to measure this 6.2% projection of real
earnings growth. One is history: real earnings grew more rapidly than that in the past
decade, and even more so in the past five years. Another model of earnings growth is given
by the return on investment multiplied by the earnings retention rate (on the presumption
that retained earnings are invested and earn the ROE): g = ROE*(1-div). Over the past five
years, MSCI data put the EM ROE at 15.5% and the dividend payout ratio at 40%,
suggesting real earnings growth on the order of 9.3% well above the 6.2% that we have
assumed for the future. Finally, the 6.2% earnings growth is fully consistent with the
roughly 5.6% trend real GDP growth that our economists tell us to expect.
Startling though the projections at first appear, we have a hard time avoiding the
conclusion that, if our positive assessment of the outlook for emerging market growth is on
the mark, emerging market equities are still cheap and should provide very solid returns
over the medium term.
10 February 2011
As always, in this document, real returns are measured as US dollar returns deflated by the US consumer price inflation.
47
Ten most promising markets

Within EM, higher growth is not
fully reflected in valuations
Advanced emerging
markets score well
A last theme that emerges from Figure 28 and Figure 29 is that within emerging equity
markets, investors do not seem to be pricing the differences in growth outlooks that we are
forecasting. On both an absolute and a volatility-adjusted basis, the markets that look most
promising to us are almost all where growth is expected to be relatively high (and, secondarily,
the outlook for further currency appreciation is more positive). If we rank markets on the basis
of volatility-adjusted excess returns, the 10 most promising are (in order) Malaysia, the Czech
Republic, Singapore, Taiwan, India, China, Chile, Peru, Poland, and Korea. Six of these are
Asian, and two of the non-Asian standouts (Peru and Czech) are very small by global
standards (less than one percent of EM market capitalization).
It is interesting to note, as well, that seven of the top 10 markets (and nine of the top 12)
are advanced emerging markets, as defined by our earlier research, which supports the view
that the structural, institutional and policy markers that defined that ranking do seem
correlated with other forward-looking assessments of high, stable growth.
One member of both the AEM and the BRIC clubs that does not make our top 10 is Brazil,
which may be surprising in light of that markets relatively appealing valuation, as measured
by PE. This is largely because volatility is high; on an absolute basis, the expected return for
Brazil is only marginally below our estimate of the EM average.
EM asset allocation Go for the growth

The decline of country risk is
largely priced into markets, so
traditional external debt
markets offer much more limited
scope for outperformance in the
years to come
Go for the growth
10 February 2011
During the past decade, and more specifically since the 2002 Lula scare, emerging market
external debt has been an outstanding investment story, delivering out-sized returns as EM
economies benefited from improved policy frameworks and a more EM-friendly global
environment, and investors re-priced EM sovereign risk in light of those improvements.
This re-pricing is largely behind us, at least in the mainstream of the emerging debt market,
and there is limited scope for a repeat of such performance in the half-decade to come. For
example, even under the somewhat optimistic assumption that the average spread on the
high-quality 80% of the external sovereign market were to fall over the next five years from
roughly 150bp to 75bp, this high-quality segment of the debt market would outperform US
Treasuries by about 250bp; not a bad performance given the relatively low-risk nature of
the underlying credits, but a far cry from the past decades performance. Something closer
to 175-200bp per year seems more plausible to us. The riskier segment of the external debt
market can perform much better, if the sovereigns in question establish policy frameworks
and track records of the sort that have become the emerging market norm, but this is not
assured, and in any event, this is a small slice of an asset class that is itself a very small slice
of the global fixed-income pie.
But while stability and credit-worthiness seem to be priced in to EM debt markets, we find
that the EM growth story is not fully priced in emerging equity markets. Equity-like returns
come along with equity-scale volatility and risk, but if the conventional wisdom about
emerging markets growth actually materializes during the coming 5-10 years, EM equity
markets should deliver returns comparable to the past 10 years very strong returns, even if
there is no continued re-rating of EM earnings streams. While other considerations may
play an important role over shorter and more tactical investment horizons, thematically, we
think investors should expect to be rewarded for their exposure to rapidly-growing
emerging market economies. Go for the growth!
48
Appendix: The dividend-discount model

Theory
We adopt a standard approach to equity valuation, which begins with the assumption that the
equity price is equal to the present value of future dividends, discounted at a discount rate
equal to a safe interest rate, r, plus an equity risk premium, rho. In theory, the equity risk
premium is the excess return (in excess, that is, of the safe interest rate, r) that is demanded
by investors to own the risky cash flows from the equity. It is also a prediction of the excess
return that will be realized over time if the forecast of cash flows is, in fact, realized. We will
therefore be using the terms equity risk premium and excess return interchangeably.
If we assume that key parameters are constant, then the present-value relationship can be
simplified to:
1)
(P/E) = div*(1+g)/(r + rho g)
Where: (P/E) is the equity markets (trailing) price-earnings ratio

div = dividend payout ratio (dividends/earnings)
g = medium-term real earnings growth rate
r = real return on a safe asset, usually sovereign debt
rho = the equity risk premium or, equivalently, the expected return in excess of
the yield (r) on a safer asset that is implied by market pricing of the expected
future stream of earnings and dividends.
Of course, the parameters div, g, r, and rho are not constant in the real world, and we
should interpret the terms in equation (1) as averages of the parameters that we expect
over the long run. Equation (1) is, thus, only approximately true, but the approximation
captures the essential aspects of the valuation problem. Our objective to estimate rho, using
observed (P/E) and estimated (r, g, div) parameters.
Data
We use MSCI data on emerging equity markets. These data are denominated in US dollars,
which we adopt as our common numeraire. Except where specifically noted, real
quantities are defined as the USD quantity, deflated using the US CPI.
The safe interest rate r

Since cash flows are in USD, the discount factor must also be in USD. This leaves us with
the option of using the interest rate on a relevant dollar-denominated instrument, or
translating a local interest rate into a USD equivalent, using forecasts of the exchange rate.
For most countries, the choice is not material, but in some (most notably Brazil), local real
interest rates are much higher than the rate on external, USD obligations. However, in such
cases, local interest rates are of limited relevance for international equity investors because
of tax, regulatory, and other costs associated with accessing local debt markets. We have
therefore chosen to measure the safe interest rate as the rate of return on a 10y USDdenominated government obligation. Where a cash instrument is not available, we combine
10y CDS and the US Treasury rate to estimate the rate. In a few cases (for example, India
and Hong Kong) where CDS is not available, we construct our own estimate based upon an
assessment. We translate nominal USD rates into a real interest using an inflation forecast
derived from the TIPS market, roughly 2.2% at present.
10 February 2011
49
Note that the choice of the interest rate is largely semantic, in the sense that it merely
answers the question return in excess of what. In particular, our estimate of total return
(r+rho) is unaffected by the choice of r. Moreover, aside from unusual cases like Brazil,
different approaches to estimating r would lead to differences that are fairly minor
compared with other drivers of equity returns.
The dividend payout ratio div

The MSCI dataset contains historical data on dividend payments, from which the dividend
payout ratio may be computed. The decision we face here is whether to use a long
historical average for the series, or a recent value. Examination of the data suggested that
the series are persistent, but appeared stationary, which suggests that there is information
about the future both in the long-term average and more recent observations. We therefore
used a simple average of the most recent (December 2010) observation and a 5-year
average. For most countries, the differences between December 2010 and the longer-run
average are fairly minor.
Figure 32: Dividend payout ratios

5-year average
Emerging markets
December 2010
Average
41.9%
33.7%
37.8%
Emerging Asia
45.0%
34.0%
39.5%
EMEA
34.0%
29.0%
31.5%
Latin America
37.0%
39.8%
38.4%
Source: MSCI, Barclays Capital. Note: Regional averages are weighted by equity market capitalization.
However, in Asia, dividend payout ratios have recently been meaningfully lower than the 5year historical average. Our assumption that they gradually converge toward the historical
average tends to raise estimated equity-market returns, compared with the assumption
that they remain at the low, relatively depressed level.
The dividend growth rate g

This is, of course, the central driver of our results, and thus requires careful attention. As a
reminder, we have formulated the analysis so that the relevant measure of earnings is USD
earnings, deflated with the US CPI. This is equivalent to real earnings in local currency
multiplied by the real exchange rate (if we adopt the convention that an increase in the real
exchange rate signifies an exchange rate appreciation). In terms of growth rates, this means
that our measure of earnings growth g is equal to the growth rate of real local currency
earnings plus the rate of real exchange rate appreciation.
We can think of three approaches to forecasting trend earnings growth. An obvious
benchmark is historical experience; we present the annualized growth rate in 2006-10 in
Figure 33.
Figure 33: Indicators of real earnings growth

Historical
Emerging markets
ROE*(1-div)
Macro
9.9%
9.5%
9.9%
7.3%
9.5%
9.7%
EMEA
10.1%
10.6%
4.9%
Latin America
17.2%
8.6%
3.6%
Emerging Asia
A second approach is to extrapolate organic or fundamental earnings growth associated

with earnings re-investment; a conventional estimate is given by the historical return on
10 February 2011
50
equity multiplied by the earnings retention rate (1-div). A third approach is the top-down
macro approach, which associates long-term earnings growth with growth in the size of the
economy, in this case, the sum of real GDP growth and the forecasted trend in the real
exchange rate. (We made one arbitrary adjustment to the macro forecasts. Motivated by
the Chinese governments stated intention to raise household income and expenditure
relative to national income, we reduced our estimate of Chinese earnings growth by 2 pp
per year below the rate of economic growth. Over 10 years, this would reduce the share of
corporate profits in GDP by about 10 pp, which is in line with the governments desired
increase in household consumption.)
In our view, it is ultimately an empirical question which of these indicators provides the best
signal about future earnings growth. Our empirical work to date suggests that the macro
drivers provide a stronger signal than the corporate fundamental estimate, but that both
are informative. We therefore use as our estimate of g a weighted average of the three
indicators, with (somewhat subjectively chosen) weights of 60% on the macro driver, 25%
on the corporate fundamental driver ROE*(1-div), and 15% on historical earnings growth.
For emerging markets as a whole, these weights do not matter much because the three
estimates of future earnings growth are very close to one another. The same is roughly true
for Asia. However, our macro-derived forecast of earnings growth is substantially below
both history and the corporate fundamental measures for EMEA and Latin America; the
relatively high weight that we attach to the macro-derived forecast thus reduces forwardlooking return estimates for those regions compared with forecasts that lean more heavily
on either history or the corporate fundamental approach to forecasting earnings growth.
10 February 2011
51
CHAPTER 3
A return to scarcity: The disinflation trend is over

Luca Ricci
+1 212 526 9039
luca.ricci@barcap.com
Amrita Sen
+44 (0) 20 3134 2266
amrita.sen@barcap.com
Malthus argued that population growth would eventually exhaust global resources.
Boserup said our ability to find more resources and use them more efficiently might grow
even faster. But then China enters the picture
Over the past decades, globalization has brought sleeping giants to the global goods and
labor market. This, coupled with technological advances in commodity production, helped
generate disinflationary pressures globally. However, the impressive growth of China and
India is increasing demand for commodities at a rapid pace, making it difficult for
technological advances to allow production to catch up with demand. This is creating
inflationary pressures on commodity prices (Figure 1), making them more vulnerable to
shocks and, hence, more volatile (Figure 2). In turn, policymakers face deeper challenges, as
central banks of commodity-importing countries have to fight these imported inflationary
pressures and respond to more volatile price fluctuations.
Malthus, Boserup, and globalization

Population growth implies
ever growing demand for
natural resources
But technology expands our

access to natural resources and
the production we can derive
from them
Since its publication in 1798, a little tract entitled Essay on the Principle of Population has
profoundly affected the way people think about population and other demographic,
economic, and, more recently, commodity and environmental issues. Written by the
Anglican clergyman Thomas Robert Malthus in the midst of Victorian Englands Industrial
Revolution, The Principle of Population set out a vision of the relationship between
population growth and what he termed subsistence. Malthus argued that population
expands geometrically, whereas subsistence increases only at an arithmetic ratio. He
believed that mans ability to increase his food supply was constrained in three ways:
through land scarcity, the limited production capacity of cultivated land, and the law of
diminishing returns. This idea was riveting in that it posited a scenario in which population
growth would outstrip subsistence be it food, land, jobs, or any of the various
components in Malthus definition of subsistence.
Almost 200 years later, a Danish economist, Ester Boserup, asserted that an increase in
population would not only increase demand for food but also spur technologists to find
ways to increase food production. Indeed, the exclusion of technology from Malthus theory
is a major drawback. Importantly, Boserups argument has a much broader application than
just food. Better technologies expand the usable set of natural resources (for example by
reaching deeper oil fields), and increase our ability to produce goods with a given amount
Figure 1: Commodity prices have surged in the past decade

Real commodity prices, indexed to 1970=100
300
Copper
Crude, rhs
250
900
Soybeans
800
700
200
600
150
100
50
60
70
Source: EcoWin, Barclays Capital
10 February 2011
80
90
00
10
Inflation volatility (1Y standard deviation)
90
Copper
80
160
Soybean
140
Crude oil, rhs
70
120
60
100
500
50
400
40
300
30
200
20
40
100
10
20
Figure 2: And so has volatility of commodity inflation
80
60
0
70
74
78
82
86
90
94
98
02
06
10
52
of natural resources. Following the final phases of peak OECD commodity consumption in
and around the 1970s, global commodity demand had been waning. Technological
innovation spurred by sustained high prices resulted in ample slack in the supply chain and a
multi-year downward trajectory for prices. Boserup appeared to have been right.
And globalization affects the
interplay of demographics
and technology
through both supply and

demand effect
Globalization and the large

supply of labor in China and
India generated deflationary
pressures globally
But recently commodity demand

in emerging markets has
increased sharply
reverting the previous trend
Only the long run will adjudge the competition between Malthus and Boserup. In this
chapter we discuss the deflationary and inflationary pressures of our own era, adding a
third dimension to the interplay between demographics and technology: globalization.
Roughly speaking, the entrance into the global market of India and China was a major shock
to global supply of labor at first, and subsequently to global demand for goods. As these
countries opened up to trade, global production for the integrated world market had access
to a much vaster pool of labor. And as these countries benefited from trade and
progressively adopted western technologies, the size of their economies grew and they are
now contributing substantially to global demand for goods, including commodities.
The effect from labor supply combined with globalization has contributed to the global
disinflationary process of recent decades. The growth in population in the developing world,
coupled with its progressive integration into global markets, has generated extensive changes
in the relative supply of factors of production, affecting relative prices and wages globally.
Figure 3 shows estimates for the increase in labour supply of the integrated global market,
which has been rising fast with trade liberalization in the developing world, notably China and
India, but also Eastern Europe. 1 This in turn has lowered the wage of unskilled workers relative
to the wage of skilled workers, thereby lowering the price of goods that use predominantly
unskilled workers (relative to other goods). This process made it easier for central banks to
engineer a disinflationary process in the past decades (as discussed more in details below).
In recent years, this process has reversed. The demand effect from fast growing EM is now
contributing to an inflationary process. As a result of the marked changes in emerging
market economies, commodity demand has surged in the new millennium. Indeed, EM
countries share of global commodity trade has risen sharply, putting pressure on prices.
The rise of India and China has completely altered the face of the global economy. These
economies have accounted for virtually all of the demand growth in the past few years,
reflecting the greater commodity intensity of their economies relative to advanced
economies. At the same time, linkages between food and fuel are increasing, with half of the
rise in global corn consumption in recent years tied to ethanol production. In an environment
of sustained demand growth, the supply response has been rather sluggish. Capacity
Figure 3: Labor force of global market (millions)
Figure 4: Global inflation on a declining trend

%
18
16
Global labor force
2500
1500
90
70
8
6
4
2
1000
500
50
30
10
0
-2
0
1984 1988 1992 1996 2000
Advanced
Total ex China, India
2004
Total
2008
%
110
14
12
10
2000
1980
Global inflation
-10
69 72 75 78 81 84 87 90 93 96 99 02 05 08
Advanced
Emerging, rhs

1
Trade liberalization is proxied via the index constructed by Sachs Jeffrey and Andrew Warner (1995), "Economic Reform
and the Process of Global Integration", Brookings Papers on Economic Activity, No. 1, pp. 1-118, and updated by
Wacziarg, Romain and Karen Horn Welch (2003), "Trade Liberalization and Growth: New Evidence," NBER Working Paper
No. 10152 (December). For China liberalization is associated with the entrance in the WTO, ie,, 2001. The sample covers
80% of world population and 91% of world GDP.
10 February 2011
53
expansion has been held back by escalating costs, reflecting geological and technological
constraints as well as infrastructure bottlenecks that have boosted the average cost of
production in marginal fields and projects. In addition, policy-related restrictions including
sharply higher royalties and taxes have limited production growth, while shortages in
skilled labour and specialized equipment have raised investment costs. As a result,
commodity prices have risen sharply in recent years (Figure 1).
due to a shift in the balance of
economic power
The shifting balance of power in the global economy has far-reaching consequences. This
change is not just an emerging market story new markets have always emerged over time.
The change underlines the resurgence of sleeping giants in the global market as well as
economic and industrial catch-up and a historic shift in wealth creation from west to east
that is bringing profound changes to the economic and financial landscape. For much of
the 20th century, the US was the undisputed economic heavyweight with key relationships
in the world market defined on this basis. But with the advent of China and India on the
periphery, these relationships have started to change.
The share of investment and
With the quest for urbanisation and growing population in emerging markets, savings rates in
these economies have started to decline. The large external surpluses in these countries are
effectively symptoms of deeper domestic structural imbalances, in particular a growing gap
between savings and investment. This has started changing quite rapidly recently. Global
investment rates started to rise in 2002, coinciding with the surge in investment in China and
India. With rapid industrialisation requiring vast amounts of investment in infrastructure, global
investment rates rose from 20.8% of GDP to 23.7% in 2008 (McKinsey). China is now investing
at higher rates than peak rates in Japan (39.7% in 1970) and South Korea (39.9% in 1991),
while Indias investment rate climbed by 16 percentage points between 2000 and 2008.
GDP in emerging countries is

highly commodity intensive
The higher demand for

investment is
commodity intensive
This investment, in turn, is extremely commodity-intensive. Emerging markets, particularly

China, currently account for the bulk of global commodity trade. Chinas percentage of global
consumption has been increased across the commodity spectrum, and while the contribution
of emerging markets to global GDP is rising, their GDP itself is becoming more commodity
intensive (see section below). The rapid industrialization of some of the worlds most populous
nations has had some serious repercussions on the commodity markets. As incomes rise in the
earlier stages of industrialization, so does per capita energy and food consumption. However,
with the most easily accessible resources already exploited, the demands of a wealthier China
and India alone have started to press up against the limits of commodity supplies. The effect
has been higher prices, which have played a crucial role in relieving some of the stresses on the
supply side. Economic cycles do introduce fluctuations in prices but the speed of adjustment in
the current cycle has been far faster than in previous cycles. The recovery in demand from the
nadir has been striking as the epicenter of global demand has shifted eastwards. As a result,
commodity prices have risen substantially to balance the market. Lower savings rates and
higher commodity prices are, in our view, a potent combination for higher inflationary
pressures in the future, with emerging markets the key drivers.
Resource scarcity is set to be a
Thus, despite some rapid technological breakthroughs over the past century, it would be
difficult to discount Malthus theory completely. Indeed, resource scarcity is a crucial social,
political and economic factor of our era and will likely remain so for the foreseeable future.
We are depleting the global stock of natural resources, ie, commodities in the broadest
sense of that term, at an accelerating pace, with the rise in per capita commodity
consumption vastly accelerated by rising prosperity in the developing economies.
Increasingly, future demand will be met only by utilising the less productive and marginal
stocks. But, given the pace of economic growth in the developing world, if technological
advances disappoint, the resource balance will become even more precarious. Relative
resource scarcity is already wreaking significant changes on global growth and inflation.
The era of deflationary effects from emerging markets seems to be coming to an end,
driven by the commodity-price-stoking desire to urbanise.
dominant theme in the future
10 February 2011
54
Monetary policy will need to

react to these external factors
The limited room between

demand and supply will
exacerbate volatility
In sum, going forward, the

demand from growing EM is
likely to create rising and
more volatile commodity prices,
thus complicating the tasks
of policymakers
These movements in demand for commodities and in factor supplies associated with
demographic trends generate pressure for large relative price adjustments at the global level (ie,
relative wages and prices across countries, or relative prices of commodities versus other goods
and services). However, there are differences in the effects across countries. At the country
level, international relative price adjustments feeding through via external trade can constitute a
large and persistent source of deflation/inflation (if not fully offset by exchange rate changes)
that may require extensive monetary policy adjustment to keep inflation near target.
At the same time, the limited room between demand and supply will exacerbate commodity
price volatility. As demand will increase at a rapid pace placing upward pressure on prices, this
in turn will stimulate technological advances to increase production in order to meet that
demand. However, as production continues to place catch-up, scenarios of excess supply will
remain limited, making commodity prices extremely susceptible to small shocks. Weather
changes, geo-political factors, disruption of production (such as the BP spill), and other
factors would thus create large price fluctuations, exposing countries to significant swings in
production and consumption costs.
In sum, countries like China and India have historically had a deflationary impact on the
world economy, but this may be turning around. Indeed, while the disinflationary effects
coming via EM supply of factors are likely to decline, inflationary effects coming via EM
demand for commodities are likely to rise. Indeed, over the past decades, high productivity
and low wages, coupled with managed exchange rate regimes, contributed to low export
prices. However, wage and real exchange rate pressures in EM countries are likely to be
stronger. Moreover, and perhaps more importantly, EM demand for commodities will
significantly affect world prices given that EMs share of global GDP is increasing. (For a
discussion of potential inflationary pressures arising from fiscal and monetary pressures in
the developed world, see Chapter 1). Volatility of commodity prices is also likely to increase,
as the small gap between available production and demand makes prices more susceptible
to shocks.
The historical disinflation trend via EM supply effects

There are many reasons behind
the global disinflation trend
Surely better monetary policy

institutions and fiscal discipline
are the main ones
Productivity, deregulation, and

competition are also important
The disinflation process over the past three decades has affected every corner of the globe
(Figure 4). There are many domestic and external reasons for this. Less expansionary
monetary and fiscal policy, strengthening productivity, enhanced deregulation, increasing
globalization, and declining commodity prices.
Among the domestic factors, improved monetary policy institutions are certainly a key one.
Deeper central bank independence, stricter commitment to anti-inflationary goals, the adoption
of inflation-targeting regimes (explicitly or implicitly), better communication with the public and
better forecasting models have spread not only throughout advanced economies, but also to
most emerging market and many low-income countries. Such advances are in part due to
stronger fiscal discipline: As public finances have improved, fiscal authorities have had less
need to exert political pressure on monetary authorities to generate inflation in order to finance
fiscal imbalances and have thus been more willing to allow central bank independence.
Other factors also exerted downward pressure on prices, thus allowing central banks to
maintain easier monetary policy while keeping inflation in check. Growth in productivity,
deregulation, and the resulting increase in competition are important factors, although
progress on these fronts has been very uneven across countries. 2
The theoretical revolution in monetary policy over the past decade has highlighted that higher competition reduces
the monetary authorities incentives to generate surprise inflation as it reduces the effectiveness of surprise inflation in
boosting employment and output. This outcome also increases central banks credibility.
10 February 2011
55
While domestic factors are clearly important, the increase in globalization meant foreign
productivity and other external factors started to matter more. The reason is that importing
low foreign inflation makes the job of central banks much easier. Indeed, disinflationary
processes are hard to implement, as there is generally strong inflation inertia from domestic
wage and price settings, and inflation expectations are hard to change. To lower the level of
inflation in an economy, central banks typically have to engineer a temporary decline in
economic growth via monetary tightening; the economic slowdown drives inflation
expectations down and domestic price-setting converges towards the lower inflation target.
Hence, the disinflation process normally comes at a cost: the foregone output necessary to
bring the inflation rate down by 1pp is called the sacrifice ratio.
But foreign factors were also

crucial, by making the job of the
central banks easier
Normally disinflation requires

sacrificing some output
When import prices grow at a slower rate than domestic prices, consumer inflation
(weighted average of imported goods inflation and domestically produced goods inflation)
declines. This relieves the monetary authorities of the need to contract domestic demand
and output in order to achieve an equivalent disinflation. Alternatively, central banks can
maintain a looser monetary policy than they otherwise would, in order to keep inflation
unchanged; in other words, they can afford to have inflation on the domestically produced
component higher than target, if imported inflation is lower than target.
But if imported inflation is lower

than the target, central banks
can afford to have inflation on
the domestically produced goods
higher than the target
Two key factors have offered an external source of relief from inflationary pressures for most
countries. The first was a decline in commodity prices, which were on a downward trend for
decades until the end of the last century (Figure 1). As the world emerged from the two oil
shocks, efficiency gains in the oil industry were widespread. Furthermore, with the
industrialised worlds move towards a greater share of service sector in its GDP, there was
enough slack in the supply chain to meet less rapidly rising demand for oil (the
industrialization of large emerging markets is currently changing this picture, as we discuss
below). Technological advances were also behind the large decline in food prices. Overall, the
effect on CPI of changing commodity prices is highly heterogeneous across countries, with
advanced economies more affected by energy prices than food prices, while the opposite
holds true for EM (see Easy money is not easy for all EM, 19 January 2010).
The two key external factors

were the fall in import prices due
to declining commodity prices
The second factor was a combination of globalization and regional differences in labor supply
and productivity. Indeed, recent decades have been characterized by the entrance into the
global market of many developing countries, some of which had large and rapidly-growing
labor forces and were reaping fast productivity gains. The wave of trade liberalization was thus
in practice associated with a sharp rise in the labor supply of the global market, particularly in
the availability of unskilled labor for producing tradable goods globally (Figure 3). Moreover,
some of these countries were reaping productivity gains from leapfrogging on the
technologies of advanced economies, while globalization created more competition.
and to the entrance in the

global market of large countries
with growing productivity
Figure 5: Chinese currency stable since mid-1990s
60
USD/INR, lhs
Figure 6: China progressively employing more workers in

tradables
10
USD/CNY, rhs
Agriculture employment in China % of total

65
9
50
60
40
55
30
4
20
50
3
2
10
45
1
0
0
1980
1984
1988
10 February 2011
1992
1996
2000
2004
2008
40
1980
1984
1988
1992
1996
2000
2004
2008
56
The country size and the

managed exchange rate
allowed these countries to
influence the international price
of their exports
So Chinese export prices did not

increase much
but its exports did
This implied imported inflation

lower than CPI in the US
Will the trend continue?
Some factors are not likely to

change much: the policy
commitment, globalization,
competition, and deregulation
These were deflationary forces. If these countries had been small, trade liberalization would
have resulted in a rapid real exchange rate appreciation of their currency (either via an
increase in domestic wages in excess of productivity or via exchange rate appreciation) and
prices would have adjusted to international levels. But the size of the countries was large
enough that they could influence world prices. At the same time, some countries, notably
China, kept a stable currency against the US dollar (the currency in which most transactions
about 85% are executed) for most of the period, so that the international price of Chinese
exports would not increase faster than the domestic price of Chinese exports (Figure 5).
Focusing on China, the massive size of the domestic labor force and the progressive reallocation
of labor from the agricultural sector towards the production of main exportables (such as
manufacturing in China and manufacturing and services in India) kept wage pressures down,
especially for unskilled labor (Figure 6 and Figure 7). In turn, the limited wage cost increases and
the massive productivity gains implied low inflation in exports (Figure 8). This, coupled with the
pegged exchange rate regime that prevented the adjustment from occurring via an appreciation
of the currency (Figure 5), induced a massive and progressive increase in Chinese exports of
goods and services (Figure 9). At the same time, China exported a deflationary effect in other
countries, as the inflation of its exports was lower than the inflation rate of most other countries,
even when converted in their local currency.
The international transmission via trade linkages was very large given the size of the country
(Figure 10) and was deeply felt in advanced economies. In the US, for example, import
deflators were flat until recently and flatter than CPI (Figure 11). As CPI is a weighted average
of import prices and domestic prices, the pattern of flatter import prices strongly contributed
to keeping CPI inflation low in the US. 3 The effects were felt even in the cost of factors of
production of advanced economies, as unskilled wages in the US grew more slowly than
skilled wages until recently because of indirect competition from abroad, and then the trend
reversed (Figure 12).
The key question now is: will the trend continue? In our view, the driving factors are
permanent, not temporary. In other words, if fiscal and monetary commitment and credibility,
regulatory and competition regimes, commodity price inflation, and Chinese inflationary
pressures remain unchanged, inflation is likely to remain low. Hence, the question becomes:
will these factors change? In our view, most of them will not. The unprecedented fiscal
expansion in advanced economies, coupled with a projected increase in aging-related
spending, is potentially worrisome. However, Chapter 1 argues that it is very unlikely that this
will lead authorities to drop their low inflation commitment (though this is always a possibility
Figure 8: China exporting disinflation until recently
Figure 7: Wage inflation catching up in rural areas

20
Urban (CNY th, LHS)
18
Rural(CNY th, LHS)
16
Urban-Rural Ratio (%, RHS)
4.0
China exports deflator

120
3.5
110
3.0
100
14
12
10
90
2.5
80
6
2.0
70
2
1.5
0
1985
1989
1993
1997
2001
Source: CEIC, Barclays Capital
2005
2009
60
1980
1984
1988
1992
1996
2000
2004
2008

3
the same pattern arises even when netting out the effect of the change in the $ value versus an international basket,
indicating that the pattern is due, at least in part, to the export price of trading partners, and not (or not just) to the
movement if the $ against trading partners.
10 February 2011
57
if things do turn sour). Deregulation is likely to continue in Europe, especially in peripheral

Europe, as part of the overall policy reform package, constituting a moderate form of deflation
in these countries. Globalization looks set to continue unless the need for fiscal adjustment
escalates a currency war into a trade war.
However, China is approaching
the Lewisian turning point
And commodity prices are

reversing trend
However, China seems likely to be less and less of a disinflationary force on the global stage.
Domestic factors are driving Chinese wages higher. Indeed, as the cushioning effect of a
large agricultural sector is diminishing (as a result of the massive reallocation of labor
across sectors that has already occurred, and the one-child policy), wage rates in urban and
rural areas are starting to converge. At the same time, international pressure on Chinese
authorities for nominal and real exchange rate appreciation is likely to strengthen, especially
as advanced economies need external demand to fill the vacuum resulting from fiscal
consolidation (see Chapter 1).
Finally, global demand for commodities is rapidly increasing, reversing the trend in place
since the 1970s. We now focus on this issue more in detail.
Looking ahead: Inflation pressure from EM commodity demand

The urbanization needs of China
and India are very positive for
commodity demand
Chinas share of global

commodity demand is rising fast
China and India have both emerged as significant economic players, with commensurate
demands on resource markets. Across virtually the entire range of hard and soft commodity
markets, inflation-adjusted prices have risen abruptly, in a handful of cases above the peaks
of the 1970s. The surge in raw material and energy prices is a clear sign that demand is
pressing up against the limits of current supply. In the same vein, the rapid industrialisation
of the developing economies has been a very influential factor in shaping the metals and
agricultural markets debate. The rise of the developing economies is certainly the single
most critical factor in the discussion of resource sustainability. The McKinsey Global
Institute Research papers Preparing for Chinas urban billion (March 2009) and Indias
urban awakening (April 2010) estimated that to keep up with the pace of urban population
growth, China would have to add 40bn sq m of residential and commercial floor spacing by
2030 and India between 800-900mn sq m each year over the next two decades and pave
some 2.5bn sq m of roads. These projections entail some serious commodity demand.
Thus, the process of rebalancing global consumption levels between the industrialised
and emerging markets is likely to be extremely positive for commodities demand in
general and has put significant upward pressure on prices. The early stages of this
process are already evident in some of the huge changes in patterns of commodity
demand seen in the past decade (Figure 13). Between 2000 and 2009, the share of China,
Brazil, India and the Middle East in global coal demand grew from 36% to 55%, while
Figure 10: The global importance of China (and India) is rising
Figure 9: Chinas fast growth in exports
Exports to GDP in China
45
40
China
India
35
Share of world exports
30
5
25
20
15
10
0
1980
0
1984
1988
10 February 2011
1992
1996
2000
2004
2008
1980
1984
1988
1992
1996
2000
2004
2008
58
their share of global GDP in dollar terms increased from 7.8% to 14.1%. In soybeans, the
share of this group rose from 33% to 44% and in copper from 17% to 44%. Chinas share
of global copper demand, at 38%, is now almost twice that of the US. And although the
US still dominates consumption in some markets, such as crude oil (with a 20% share of
the global demand), it is emerging markets that are driving almost all of the additional
consumption growth. Of the 2.9 mb/d of global consumption growth witnessed by the
global oil market just in 2010, almost 85% came from non-OECD countries, with China
alone contributing almost 1 mb/d of that growth.
Global trade flows are changing
with EM Asia attracting a larger
proportion of global
commodity trade
Global intensity of the use for

most commodities fell until
the start of the last decade
Aluminiun is a key example
As a result of this sea change, global trade flows have also been changing, with emerging
markets (particularly China), accounting for the bulk of current global imports. Take oil, for
example. Commensurate with the ongoing shift in oil demand growth from west to east, there
has been a shift in oil trade flows (Figure 14). The US share of Saudi exports reached around
20% in 2001, from 15% five years earlier, over the period when US oil demand rose by a
cumulative 1.4 mb/d, contributing 22% of the overall rise in global oil demand. However, over
the last decade, although the pace of growth in global oil demand picked up, it slowed in the
US, where the contribution to global oil demand growth halved to 11%. The US share of Saudi
exports began to shrink, effectively reversing a substantial portion of the gains made through
the late 1990s. The sharp fall in US oil demand in 2008 and 2009 dramatically intensified the
reconfiguration already at work in Saudi trade flows, with the US share of Saudi exports falling
to their lowest levels in more than 30 years. At the same time, even in the face of the greatest
global downturn since the 1930s, Chinas crude oil imports rose by 14% y/y in 2009.
Moreover, Chinese imports from Saudi Arabia rose even faster, reaching record highs and
overtaking the US and Japan as the single largest destination of Saudi crude for various
months in 2010. Saudi Arabia already supplies nearly 25% of Indias oil needs, having
increased exports to India sevenfold between 2000 and 2008, and has recently agreed to
increase crude shipments to India from about 0.5 mb/d currently to 0.8 mb/d. Indeed, in
2009, 70% of Middle Eastern oil was exported to the Asia-Pacific, with only 30% making its
way across the Atlantic.
The impact of this emerging market growth can be seen at the global level, with long-term
declines in the global intensity of use of a wide range of commodities either reversing or
slowing substantially in the last decade (as Figure 15 and Figure 16 show). Aluminium is a
particularly good example of this. Between 1980 and 2000, the amount of aluminium used
per unit of global GDP fell at an average annual rate of 1.1% pa. Although aluminium was
capturing market share in end-use applications such as packaging and transport over this
period, other factors, including more efficient usage, higher recycling and a move in the
industrialised world towards a greater share of service sector in its GDP, more than offset
Figure 11: US imported inflation is changing trend

160
US imports deflator
Figure 12: US relative wage of skilled to unskilled workers
US CPI
140
1.80
120
1.75
100
1.70
80
Wage of production to non-production workers in

the US
1.65
60
1.60
40
1.55
20
1.50
0
1980
1984
1988
Note: Indexed to 2003=100

10 February 2011
1992
1996
2000
2004
2008
1980 1983 1986 1989 1992 1995 1998 2001 2004

Note: As proxied by the relative wage of production to non-production
manufacturing workers. Source: NBER CES manufacturing industry database
59
these trends so that the growth in aluminium demand expanded less rapidly than overall
global growth. In the past decade, however, aluminiums intensity-of- use trends have
altered markedly. This is mainly because emerging markets now account for a much larger
share of global growth and their current development phase is highly aluminium-intensive
owing to its use in infrastructure, consumer durables and other industrial end-uses.
The same pattern of increase or reversal of decline in the intensity of use is visible across
many other commodities, and its extent is generally related to the importance of demand in
advanced economies. For example, in oil, the slowdown was small because the bias of
OECD countries in total oil demand was considerably large. This too, has started changing:
the watershed for the emergence of non-OECD countries as the dominant marginal
consumer was reached only in 2010. As Figure 15 shows, the downtrend in global intensity
of use of oil has started to flatline. While non-OECD energy consumption exceeded that of
the OECD back in 2008, it was primarily due to continued rapid coal consumption growth,
which constitutes about 70% of energy consumption in these countries. Indeed, between
1980 and 2000, the global intensity of use in coal had been falling at an annual rate of
2.4%, but since 2000, that has reversed to 1%, with 2010 seeing an even higher usage.
Thus, the long-term trends in global commodity intensity use have started to change
significantly owing to the changing patterns of demand in emerging markets (Figure 16).
But the global intensity of the

use of oil remains on a declining
trend as the share of demand
from advanced economies
is large
Sur la table
As countries grow wealthier, per capita consumption of resources increases sharply, not
only for those related to metals or energy consumption, but also to agricultural products.
Consider something as simple as the change in diet driven by increasing wealth. In 1990,
Asia consumed 16.7kg/person of meat per year. By 2002, meat consumption had
increased 66% to 27.8kg/person. By the end of the decade, this had risen to
70kg/person, a phenomenal increase of 320% over two decades. With per capita meat
consumption in developed nations far from falling, the changing dietary patterns in
developing countries have been among the key factors behind the surge in agricultural
prices, particularly of grains (Figure 17).
Meat consumption in Asia

has increased by 320% over
two decades
The rise in per capita agricultural resource consumption is most intense in China. As the
countrys population has grown wealthier and adopted a more meat-based diet,
consumption of feed crops like soybeans and corn have soared. Indeed, rising meat
consumption since the 1980s has drawn more of Chinas land into production of feed
crops and created robust demand for imported soybeans and fishmeal that add protein
to feed for poultry, hogs, and cattle. Over the past decade, the US Department of
China alone will demand a large

increase in feed production
Figure 13: The share of EM in commodities has risen steadily

55%
Shares of emerging market in global commodity demand
50%
Figure 14: Trade flows also capture that shift

1700
Saudi exports of oil, mb/d, 6-month average
1500
45%
40%
1300
35%
1100
30%
25%
900
20%
700
15%
500
10%
5%
300
1992
1998
Copper
2004
Oil
2010
Soybeans
Note: EM includes Brazil, China, India, Middle East Source: BP statistical review,
Brook Hunt, USDA, Barclays Capital
10 February 2011
05
06
07
EU
08
US
09
10
China
Source: DOE, China Customs, Eurostat, Barclays Capital
60
Agriculture (USDA) estimates per capita meat consumption to have increased by 8.2kg in
China to above 50kg. It is estimated that the feed required to produce 20kg per capita of
extra meat for Chinas 1.5bn people in 2030 will represent an extra 320mt of feed over
the next 20 years, requiring global feed production to reach 1,300mt (Lyons, 2007).
As a whole, Asia in 2015 will account for more than 60% of the global population, more than
70% of global pork consumption, and more than 35% of global chicken consumption,
requiring an additional 391mt of pig and poultry feed by then. Even if the largest producers of
grains, including Brazil, Argentina, the United States and Ukraine could double their grain
production, there would still be insufficient feed available to deliver the extra 20kg per capita
of meat to China, let alone to meet the needs of Asia as a whole.
Currently, China alone is responsible for 60% of global soybean imports (Figure 18).
Chinese dependence on soybeans has increased more than twofold over the past decade
and remains the key demand-side dynamic of the market. More recently, China, which has
traditionally been self-sufficient in corn and even exported a surplus to the global market,
has turned into a net importer of that grain. In the last seven months of 2010, China
imported more corn than it exported, adding further pressure to a market where a
significant part of the crop is diverted for the production of fuel ethanol in the US.
China accounts for 60% of

global soybean imports and has
switched into a net corn
importer too
Figure 15: Long-term declines in intensity of use slowed or

reversed for many commodities in the last decade
Market
1980-2000
Intensity of use increasing
Aluminium
-1.1%
Coal
-2.4%
Soybeans
1.3%
Corn
-1.7%
Intensity of use falling less quickly
Lead
n.a.
Engy. exc.oil
-1.4%
Hydro
-1.4%
Carbon
-2.3%
Copper
-1.2%
Gas
-1.0%
Zinc
-1.5%
Wheat
-2.3%
Nickel
n.a.
Oil
-2.6%
Intessity of use falling more quickly
Nuclear
4.8%
Gold
2.5%
Global intensity of use of selected commodities

(consumption/real value of global GDP, 1970=100)
130
120
110
100
90
80
Aluminium
Soybeans
Copper
Coal
Oil
70
60
50
1970
1977
1984
1991
1998
Figure 16: Long-term trends in global intensity of use for

selected commodities
2005
2000-2008
2.7%
1.0%
0.7%
0.3%
-0.1%
-0.1%
-0.6%
-0.6%
-0.7%
-0.7%
-1.3%
-1.8%
-2.0%
-2.0%
-2.5%
-6.2%
Source: BP database, USDA, Brook Hunt, Barclays Capital
Source: BP database, USDA, Brook Hunt, Barclays Capital
Figure 17: Food prices have risen steadily over past decade
Figure 18: China takes over 60% of global soybean imports
500
Corn
Wheat
60%
Soybeans
450
China's soybean imports as a % of global imports
50%
400
350
40%
300
Prices indexed to
100 in Jan 2000
250
30%
20%
200
150
10%
100
50
00
02
10 February 2011
04
06
08
10
0%
82/83
89/90
96/97
03/04
10/11E
Source: USDA, Barclays Capital
61
The tight excess supply

pushes up prices and
makes them susceptible
to higher volatility
One of the main consequences of the resource shortages is price volatility. While changing
weather patterns have no doubt exacerbated price increases and volatility, weather has
always been and will always remain the wildcard in agricultural prices. However, within that
seasonal volatility, what stands out in agricultural markets is the overwhelming change in
demand patterns from the emerging markets in the span of just a few years. Thus, when
such extreme weather conditions are unleashed on markets with thinning inventory cover,
rapidly rising prices are almost inevitable.
Technological advances will be

significant but may not be
enough to calm prices.
This is not to suggest that agricultural supplies are shrinking. In fact, productivity has risen
sharply over the past few years as vast amounts of land have been diverted to agriculture.
Moreover, the mechanisation of agriculture has led to significant efficiency gains and, rising
from a low base, could revolutionise farming even further. However, given the time lags
involved and the rapid pace of demand growth, the stresses and strains on the supply side
are likely to persist, at least in the short term. Indeed, this is the crux of the theory that
underlines the difference between Malthus and Boserup. While Malthus did not account for
technological innovation, what Boserups theory fails to explicitly highlight is the time lag
taken for these changes to come through. Further, and perhaps more importantly, the
potential negative feedback generated by unrestrained growth are now widely
acknowledged, something we would highlight as a caveat to Boserups arguments. Natural
resource scarcity is a genuine problem, the onset of which has been quickened by rapid
industrialisation in China and also by the linked acceleration in economic development in
other emerging markets. For agricultural commodities in particular, the encouragement of
biofuels as a substitute for oil has collided with the immovable logic of a fixed supply of
agriculturally productive land, the net results being a displacement of food crops and
increased food prices. Increasingly, the inability of the market system to price and, thus,
regulate negative externalities and the unintended consequences of market transactions
is becoming a central concern of both economic policymakers and electorates.
Black gold
OECD countries still account for
the bulk of oil demand, but
growth is coming from nonOECD countries now
In the same vein, industrialisation and rising income levels drive an increase in per capita
energy demand. In the last decade, an 86% increase in Chinese income per capita levels has
prompted a 50% increase in Chinese per capita energy demand. Indeed, since the turn of
the millennium, China alone has been responsible for close to 55% of the global increase in
primary energy demand (Figure 19). In the oil market specifically, the contribution of China
alone has been tremendous. Since the late 1990s, OECD oil demand growth had flattened
and then tailed off markedly since 2004. Between 2000 and 2010, the cumulative increase
in oil demand amounted to 11 mb/d, with Chinas share at an eye-catching 46%. In fact,
Figure 19: Relative increase of Chinas energy demand

0.5
Annual increase in global primary energy demand
Figure 20: World oil demand growth is biased towards China

140%
120%
0.4
Global
btoe
China
0.3
100%
80%
Contribution to global oil demand growth

2000-2009
2009-2015
60%
0.2
40%
0.1
20%
0.0
-20%
0%
-40%
-0.1
-60%
-0.2
-80%
1999
2001
2003
Source: BP statistical review, Barclays Capital
10 February 2011
2005
2007
2009
OECD
Non-OECD
China
Source: IEA, BP statistical review, Barclays Capital
62
since 2000 the contribution of non-OECD countries to global demand has been growing
steadily, and since 2005 non-OECD oil demand growth has averaged 1.3 mb/d, just as
OECD growth has gone into negative territory, averaging -0.5 mb/d. Thus, by the end of the
last decade, the transit of non-OECD nations to the margin of the oil market was very much
complete (Figure 20). Rapidly rising living standards generating strong growth in
automobile sales, rising internal trade creating a surge in commercial freight traffic and the
orientation of several emerging economies towards energy-intensive industries, including
the mechanization of agriculture, have resulted in a structural shift in oil demand towards
countries with low price elasticity and high income elasticity of demand.
According to Dargay and Gately 4, economists long associated with oil demand analysis,
after last decades price quintupling, demand reduction in the OECD has been far less (3%
per capita in 1998-2008) compared to the 1970-80s, when the same figure stood at 19%
(between 1973-84). Their analysis reveals that non-OECD per-capita oil demand grew
slightly faster in 1998-2008 (23% vs. 20% in 1973-84), due primarily to much faster
income growth. World oil per-capita demand, instead of dropping 13% in 1973-84, actually
grew in 1998-2008 (4%), albeit at a slower pace than in the non-OECD itself, as income
grew more than twice as much in 1998-2008 as in 1973-84. The lessened demand
response in 1998-08 was due to faster non-OECD income growth, a larger non-OECD share
of Total World Oil (37% in 1998 vs. 27% in 1973), and most importantly, the fact that
OECD fuel oil the most price-responsive product in the most price-responsive region (as
Dargey and Gatelys econometric results demonstrate) comprised 33% of total world oil
in 1973 but only 14% in 1998.
Demand: voracious appetite

Should Chinese and Indian per
capita oil consumption reach
that of the US, oil reserves would
last for just 18 years
The potential increase in

gasoline demand from emerging
markets is significant and can be
more than three-fold
Consensus projections are equally striking and would lead us to believe that an increase in
developing world per capita consumption of some resources, such as oil, to developed world
levels is simply impossible. For instance, the International Energy Agency (IEA) estimates that
by 2015, Chinese oil demand will have increased some 40% from 2009 levels, contributing a
similar level to global oil demand growth. While this is an impressive figure, it is nothing
compared with what may be coming over the next decades. Let us assume the Solow-Swan
neoclassical growth model and take its key prediction that the income levels of poor countries
will tend to catch up with or converge towards the income levels of rich countries as long as
they have similar characteristics. For Chinese and Indian per capita oil consumption to reach
that of the US, the former has to rise by nine times and the latter by 23 times. That would
require an additional 170 mb/d of oil supplies, almost double the current global total. Such an
increase would push total world oil demand to 260 mb/d, assuming flat growth in other
emerging market nations (a highly implausible assumption in the first place). Such an increase
in demand would deplete proven reserves in just 18 years, even if we used comparatively
generous estimates of total reserves, including Canadian oil sands, heavy oil in Venezuela and
the recent upward revisions to Iraqi and Iranian reserves.
Even considering oil demand resulting only from projections of gasoline consumption (one of
the many component of oil demand) delivers striking numbers. In 2009, Chinese passenger
car sales soared to 10.3mn, with y/y growth in vehicle sales amounting to 49%, partly
boosted by government stimulus packages. In 2010, while the y/y growth moderated, it still
amounted to a 40% y/y increase for the year through Q3, despite some of those incentives
having been partially phased out. Indeed, to assume that Chinas auto demand was purely or
primarily a function of that stimulus would be a huge mistake, and the continued momentum
this year cements the view that the vehicle fleet will continue to grow as income levels rise.
Even assuming an average annual growth rate significantly below current levels, eg, 9% pa
from next year (in line with GDP forecasts), the total number of cars on the road would reach
around 180mn by 2020 (accounting for a 10-year scrappage cycle). This would roughly
10 February 2011
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63
double the amount of gasoline demand by 2020 to more than 3.2 mb/d (assuming 0.4
elasticity between car sales and gasoline demand, as in the pre-2008 era), adding an
additional 1.7 mb/d to oil demand from gasoline alone (note: gasoline is a far smaller
component of Chinese oil demand than diesel and petrochemical demand, which remains
more leveraged to industrialisation). Should auto sales continue to rise at the recent pace,
then the demand for gasoline could rise six fold by 2020.
Benchmark estimates tend to work on the hypothesis that the relationship between the
number of cars per capita and rising wealth in emerging markets will follow a different,
flatter trajectory compared to that tracked by the OECD nations at their time of
development. The IEA, in its latest World Energy Outlook, notes that a 1% higher rate of car
sales in China compared to the global benchmark of 1.8% would result by 2020 in 95mn
more cars and 0.8 mb/d of additional oil demand. Replicated for all of the non-OECD
countries, this would create an additional 3.6 mb/d of global oil demand. Given the current
rate of auto sales in just India and China, the IEAs projections once again strike us as far too
conservative. Nonetheless, even on the basis of its cautious estimates, the IEA does forecast
that significantly higher oil prices will be required to curtail demand growth, a key variable
likely to put a ceiling on the growth of gasoline in emerging countries. As a paper by Marcos
Chamon, Paolo Mauro, and Yohei Okawa 5 finds, an increase in fuel taxes while a
promising avenue to stem the increase in greenhouse gases and reduce congestion, and
most definitely better than doing nothing is unlikely to be able to avert a massive increase
in the undesirable by-products of car ownership and use. Dargay and Gately 6 also find that
the relationship between the growth of vehicle ownership and per-capita income is highly
non-linear. Historically, vehicle ownership has grown relatively slowly at the lowest levels of
per capita income, about twice as fast at the middle-income levels (from $3,000 to $10,000
per capita) and finally about as fast at higher income levels before reaching saturation. Thus
the potential for growth in per capita oil demand from Asian economies is huge (Figure 22).
Current consensus estimates are

underestimating future oil
demand, factoring in
significantly higher oil prices in
the process
Oil demand growth in the future could be higher still, due to the bias of diesel in non-OECD
countries. Although gasoline is employed almost exclusively in passenger cars and the
potential for its increased use is immense, considering the bias of demand growth towards
Asia, and then the bias of Asian demand growth towards diesel, incremental oil demand
through rising diesel consumption is likely to be higher still. Together with the anti-gasoline
bias in Europe, the transit of non-OECD nations to the margin of the oil market has been a
key factor in biasing global oil demand growth towards middle distillates. A crucial reason
for this is the different oil demand structure of developing and developed nations, with the
Diesel and industrial uses

constitute the bulk of oil demand
in non-OECD countries and it is
rising very strongly
Oil consumption per capita per year bbl
Figure 22: Per capita oil consumption in China is far lower

than the developed Asian economies
20
Figure 23: Composition of total oil demand in EM countries is

biased towards diesel
Diesel/Gasoil
Gasoline
Indian Demand
China Demand
Other
100%
18
16
80%
14
Japan
12
60%
10
Korea
40%
Taiwan
6
4
20%
China
GDP per capita ($ PPP)
2
0
0
10000
20000
30000
OECD Demand
Source: IEA, Barclays Capital
5
6
10 February 2011
0%
40000
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1108502##
http://www.econ.nyu.edu/user/nyarkoy/OilDemand_DargayGately_Feb2010.pdf
64
former being much more dependent on diesel than the latter. As of 2010, the share of
distillates demand in China was more than twice that of gasoline and in India this ratio
stood at 4:1, compared to a broadly even split between gasoline and distillates in the OECD
(Figure 23). The difference in the structure of oil consumption is primarily attributable to
stages of economic development.
Diesels dominant position in the commercial freight traffic has made it a fast-growing
demand component in countries characterized by large distances in internal trade and by
strong underlying economic growth. In China, significant government investment in the
road system and a mandate in 2000 that all trucks should run on diesel by 2010, are also
facilitating the rapid expansion of domestic diesel demand. Beyond road transport, diesel
also continues to be the primary fuel employed in Chinas rail system and is also a major
fuel for several significant types of marine transport. A similar picture can be painted for
India, where diesel makes up 70% of road fuel use because of the intensity of truck and bus
fuel consumption as well as the increasing penetration of diesel in the light duty truck
segment. Moreover, the orientation of several emerging economies towards energyintensive heavy industries (which often heavily utilize diesel-powered equipment), as well as
the continuing mechanization of the agricultural sector, has further supported diesel
consumption, notwithstanding the use of diesel as the marginal source of power supplies in
these countries during periods of power rationing.
Independent forecasts indicate
much higher future oil demand
than agency forecasts
Non-OECD countries
have far higher price elasticity
and lower income elasticity
Indeed, Dargay and Gately, in another paper 7, recently argued that the elasticity estimates
with long-run demand forecasts made by the OPEC Secretariat, IEA and the EIA appear to
be too low. Using the estimated elasticities from a 1971-2008 data sample, Dargay and
Gately produce a reference forecast for 2030 of global oil demand of 134 mb/d, which is
some 28 mb/d higher than the consensus of the agency forecasts. To get down to the
consensus forecasts would require radically higher price elasticities and lower income
elasticities than they have estimated. The implication is that to be anywhere near correct,
the main long-run agency forecasts (IEA expects only 8.9 mb/d of incremental oil demand
between now and 2030, while the EIA expect 16.2 mb/d) would need a baked-in
assumption of sharply higher prices to generate such subdued long-term demand levels in
comparison to both our analysis of convergence of per-capita oil usage and Dargay and
Gatelys projections and, once again, this would likely be inflationary in nature.
The reality is that actual demand growth potential is likely to be significantly higher than is
conventionally assumed, as benchmark forecasts perhaps incorporate excessively optimistic
gains in energy efficiency for emerging economies (akin to those achievable in an already
industrialised nation through higher oil prices). In these growing economies, oil demand has
a far higher income elasticity but a substantially lower price responsiveness, as is true for
any region at a stage of rapid growth and industrialisation (Figure 24). This all raises the
recurring question of whether the world can support the growth of China and other
emerging markets without facing significant inflationary pressures in the coming years.
Supply: Failing to catch up

Against the backdrop of
rampant demand, supply is
struggling to keep pace
The problem in commodities is compounded by the issue of a rapidly declining accessible

reserve base across a host of commodities. Despite higher prices, growth in production
capacity has been limited. This is due to the fact that the rate of increase in production
capacity is relatively insensitive to price, as net capacity additions are constrained by the
steep decline in output from existing fields, particularly in non-OPEC countries. Thus, even
though companies have increased their exploration and production spending through these
years (see The Original Oil Service & Drilling Monthly, December 23, 2010), the success rate
of large finds or, more importantly, translating it into actual output has been limited.
10 February 2011
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65
Figure 24: China and India already consume more energy for similar urbanization rates
Energy use (Kg of oil equivalent per capita)
6,000
China
India
Korea
Japan
5,000
Middle East
South Africa
4,000
Brazil
Mexico
3,000
2,000
1,000
0
0
10
20
30
40
50
60
70
80
90
Urban population (% of total)

Source: BP Statistical Review of World Energy, 2010, Barclays Capital
Spending is required simply to maintain output due to the decline rates, with matters made
worse by problems of access to undeveloped resources and logistical constraints.
The oil industry may
need to invest $8trn
over the next 25 years
and this is likely to

be an underestimate
Decline rates are very high in oil

fields and investments required
to meet incremental demand
is huge
Incidents like Macondo

complicate matters further
10 February 2011
For instance, the IEA calculates that the oil industry needs to invest $8trn (constant 2009
prices) between now and 2035 (the annual value of the oil market is roughly $2trn, equating
this to four years worth of global production), with the global energy sector as a whole
requiring a staggering $33trn in cumulative investment to be able to meet incremental
demand. Effectively, this investment should enable the replacement of reserves and
production facilities that are retired, as well as the expansion of production and transport
capacity to meet demand growth. Of the $8trn required for oil, 85% is required for the
upstream oil activities. Note that the IEA projects such alarming figures despite projecting a fall
in global oil demand growth between 2010 and 2030 due to higher prices and technological
efficiencies. Given that we see the agency to be underestimating future oil demand, these
investment figures may need to be substantially higher in reality. With the bulk of non-OPEC
traditional oil production mostly in decline (Figure 25) and overall non-OPEC supply presumed
to hold up only on the basis of substantial increases in expensive unconventional production,
virtually all the increase in supply is expected to be generated by OPEC members, keeping
prices aligned with their domestic interests.
Production from existing fields has entered a steep decline stemming from years of underinvestment, and costs have escalated in recent years. Some estimates of decline rates are
well above 6-7%. With many large oilfields already in the decline phase, the speed of
bringing on new supply to offset the declines has become increasingly important. Indeed,
almost half of the increase in proven reserves in recent years has come from revisions to
estimates of reserves in fields already in production, rather than new discoveries. Although
discoveries have picked up in recent years with increased exploration activity (prompted by
higher oil prices), they continue to lag production by a considerable margin: in 2000-09,
discoveries replaced only one out of every two barrels produced (IEA) slightly less than in
the 1990s (even though the amount of oil found increased marginally) the reverse of
what happened in the 1960s and 1970s, when discoveries far exceeded production. The
contribution of offshore discoveries, including deepwater, has increased significantly since
the early 1990s. Since 2000, more than half of all the oil that has been discovered is in deep
water. Although some giant fields have been found, the average size of fields being
discovered has continued to fall.
Moreover, with events like the BPs Macondo oil spill bringing the upstream process and its
technology into regulatory focus, costs for oil production could increase further. The spill
dealt a severe blow to the reputation of the industry, and raises questions about the
technology that is key to the development of the deep- and ultra-deep-water fields that
represent the frontier for non-OPEC production. Development plans will be subject to intense
66
scrutiny, with safety features requiring extensive examination and various back-ups. The
impact has not been restricted to the US alone various other countries, including Norway
and, to some extent, China, have become far more concerned about the environmental
impacts of their offshore projects since the BP disaster. We would go further, saying that a
broader redefinition of the industrys parameters is potentially the most important aspect of
Macondo. Indeed, the impact may well spill over to onshore production techniques, which
are highly energy intensive and environmentally contentious, with very little margin for error
across a wide range of such activities now.
The recent recession has
provided little respite from the
imminent supply crunch related
to the demand shock
as strong EM growth
brings oil demand
to an all-time high
And OPEC spare capacity has

started to come off
The limited excess of supply will

likely drive price volatility up
The potential for nonconventional oil is large, but

requires a higher price
10 February 2011
The global recession did not change the big picture. For instance, 2010 started with a
comfortable buffer for the oil market, following the downturn in demand in 2009. The
market was plush with inventories, while OPEC had stepped in to cut production in order to
shore up prices. Further, OPEC also expanded further capacity during the time frame,
envisaging oil demand growth in the future. As a result, we had 5.5 mb/d of spare capacity
in the market, along with total offshore and onshore excess inventory amounting to some
300 mb. Moreover, despite a stronger-than-expected outcome in non-OPEC supply, the
demand shock was such that the inventory overhang is all but gone and the effective spare
capacity has reduced from 5.5 mb/d to just under 5 mb/d currently.
The primary reason for this has been the sharp growth in non-OECD oil demand. Consensus
estimates for demand in 2010 were revised higher throughout last year, as were mediumterm demand prospects. In the IEAs latest Medium Term Oil Market Report, global oil
demand for 2014 was revised up by an enormous 3.3 mb/d over just 18 months. Last year,
the IEA did not expect global oil demand to surpass its 2008 peak until 2012, and some
placed that milestone even further into the decade. In reality, it has arrived already, with
2010 setting a new record annual average for demand and surpassing the previous peak by
almost 1.4 mb/d. What looked set to be a rather long haul back to pre-crisis levels just a
year ago has arrived with something of a swagger just 18 months into the worst financial
crisis since the 1930s, with emerging market nations at the peak of that change.
Equally, the sweep of market expectations at the start of the year factored in, at best, a flat
profile through the year, and many were looking for a further move up. In our view, spare
capacity of 5.5 mb/d was not particularly large in the first place, especially in a market that
is moving swiftly upwards towards the 90 mb/d mark, but such has been the strength of
emerging market demand that OPEC spare capacity effectively ended the year below where
it began. The recession of the early 1980s almost completely removed fears of longer-term
oil market tightness, and it took 25 years for those concerns to become widespread again.
In sharp contrast, the last two years of economic down-cycle have not removed fears of
impending supply tightness. If anything, those concerns have intensified and the likely scale
of the perceived crunch has grown in terms of consensus expectations. In retrospect, it
appears that the global economic crisis has postponed, but not cancelled, a crunch that
otherwise would have been starting to bite pretty much now.
So, the rapid increase in developing economy energy demands during the current cycle has
already eroded the margin of comfort in the oil market, to the point where the successful
and timely completion of single projects becomes essential for market stability. Any
moderately significant supply interruption or project delay could leave supply falling short
of demand. The oil market has reached a juncture at which the supply-demand balance is
starting to teeter on the brink of a crunch.
This is not, we would note, because the world has actually run out of oil. Quite the contrary
unconventional oil is set to play an increasingly important role in world oil supply, with
both the IEA and BPs latest medium-term report forecasting 7.2 mb/d (8% of current
global oil production) and 11 mb/d (13% of current global oil output) of incremental
production from such oil plays. Canadian oil sands, biofuels and Venezuelan extra-heavy oil
dominate the mix, but coal-to-liquids, gas-to-liquids and, to a lesser extent, oil shales are
also likely to make a growing contribution. Unconventional oil resources are thought to be
67
huge several times larger than conventional oil resources. Nor is the narrowing margin of
comfort attributable to lacklustre investment. To take the US as an example, GDP data
show nominal investment flows into mining exploration, shafts and wells rising from $27bn
in 2000 to $121bn in 2007, a rise of some 440%. Yet in real terms, investment into this
sector has not even doubled, as capital costs and labour rates soared during that period.
While the recent downturn help alleviate some of those cost pressures, the swift recovery
cycle is once again putting these issues back in the limelight (Figure 26).
The basic problem is not a shortage of oil per se, but a shortage of easily and cheaply
accessible oil outside OPEC, combined with a rampant shortage of capital equipment and
skilled labour. The rate at which these unconventional reserves are exploited will be
determined by economic and environmental considerations, including the price of oil and
the costs of mitigating their environmental impact, which in some cases, are extremely
high. Moreover, the key problem here is that unconventional sources of oil are among the
more expensive available: they require large upfront capital investment, which is typically
paid back over long periods.
But the problem, again,

is access and costs
In short, surging per capita income levels in the developing world, primarily in China, have
delivered an energy demand shock. Despite a rise in inflation-adjusted oil prices above their
1970s peak, and despite a commensurate increase in nominal investment, the supplydemand balance has moved into progressively more precarious territory (Figure 27). In
other words, relative to other sectors of economic activity, oil has become scarce, implying
a need to divert ever larger shares of total economic resources into the exploration and
recovery of oil. As a result, the incremental cost of each barrel of oil is rising and will likely
continue to rise in the absence of a drastic drop in demand.
Of course, this is not to rule out technological innovations and the impact it can have on
altering the supply-demand dynamics of commodity markets and, hence, prices. There are
some notable exceptions to the persistence of significant supply concerns. The most
important is US natural gas, where the pricing shift at the margin from the economics of
conventional gas to the economics of shale gas had been happening for a few months before
the intensification of the financial crisis in September 2008. A strong technological shift (using
horizontal drilling and hydraulic fracturing) has taken the dominant mindset from one of
structural deficit to one of structural surplus. Supply growth has outperformed demand
growth for several years and is likely to continue to do so for the foreseeable future. That has
led to a market in which technological perceptions are playing a heightened role, particularly
as the exact parameters of the economics of scale in terms of the tail-end behaviour of
reservoirs, are to some extent still being revealed through experience. The change in the
Technological innovations can

alter the shape of the demand
and supply profile, but currently
don't seem to be in the
near-term horizon
Figure 26: The cost of production, especially outside OPEC,

has soared
Figure 25: Non-OPEC supply growth has faltered even

though prices have increased steadily
2.0
y/y change in non-OPEC production, mb/d
100
Oil price, annual average, $/bbl
90
1.5
80
80
Long run cost of supply to get 12% IRR

$/bbl
60
70
1.0
60
50
0.5
40
40
0.0
30
20
20
-0.5
10
-1.0
1967
0
1973 1979
1985
1991
10 February 2011
1997 2003
2009
0
1994 1996 1998 2000 2002 2004 2006 2008 2010
Note: IRR=Internal rate of return. Source: Barclays Capital Equity Research
68
perceived net import profile for the US, together with the prospect of the spread of shale
technology, have also helped to soften perceptions on a global basis. From being the first
major market to show a pronounced shift up in prices all along the curve, the gas market has
also been the first to experience a significant lessening of concern, albeit one that has left
longer-term prices significantly above historical levels. Thus, with oil, too, significant
technological advances in the alternative energy space could alter the demand profile.
Technological breakthroughs could also ease production problems in challenging oilfields
over time. However, for now, the alternatives on the demand-side are the more expensive
transportation options. On the supply side, incidents such as Macondo have effectively taken
the oil industry backwards in terms of technology. Thus, sustained higher prices will be
required to encourage both (on the demand and supply side) to the mainstream, in our view.
Once again, the recent developments in the energy natural resources space highlight the
shortcomings of applying Boserups idea to the oil and gas industry. While technological
innovations have no doubt helped to alleviate extreme short-term tightness in a variety of
markets at times, and have so far, broadly, been able to absorb the rising demand needs from
the planet, the depletion of natural reserves has not been avoided. The current hydrocarbon
dependency is not a feasible path if per capita energy consumption in the developing world
continues to rise. Pressing a business-as-usual model much beyond its current levels would
start to produce negative economic feedback in the shape of spiralling oil prices and climatic
deterioration, which would eventually overwhelm the primary trend of rising prosperity.
Metals the story continues

Higher metals prices can also be
inflationary as a result of rising
capital equipment costs
China already accounts for 40%

of global copper demand
The problems do not end with agricultural and energy markets. The familiar combination of
soaring developing economy per capita consumption, allied to increasingly sticky supplies,
is beginning to delineate the outlines of supply boundaries of most commodity markets.
Metals are no exception. The rise in prices here and the potential for further rises should not
be underestimated; the metal-intensive nature of current investment has a significant
knock-on impact on capital costs. With China the dominant buyer in the bulk of the metals
market, when considering demand against the existing reserve base, the problems of
scarcity are equally apparent.
Similar to oil, a rise in Chinese metal consumption per capita to developed economy levels
does not look plausible. Currently, Chinese demand constitutes about 40% of global copper
demand, despite per capita copper consumption being some 10 years away from the average
level in other developed Asian economies. Should China reach those levels (ceteris paribus),
the projected level of Chinese demand alone would grow to over 20mt from the current 7.5mt
and would actually be higher than current global mine production of about 16mt. This
Figure 27: The disparity between demand and supply is growing in the oil market
5
y/y change in oil demand and supply, mb/d
Non-OPEC supply
Global demand
4
3
2
1
0
-1
-2
-3
66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Source: BP Statistical Review of World Energy, 2010, Barclays Capital
10 February 2011
69
outcome would imply that total copper output would need to more than double, even if
demand in the rest of the world, and in particular, in other emerging giants, like India,
remained static.
And copper supply faces
decreasing returns
Higher prices are a necessity to

bring on marginal production in
commodity markets and to
moderate growth rates, thereby
curbing inflation
On the supply side, copper faces a similar situation that we see in the energy markets, where
the increasing share of oil reserves consists of deepwater fields or tar sands, deposits that are
much more difficult and expensive to exploit than traditional fields. Although the increase in
global copper ore reserves over the past decade is similar to that of the prior decade, the fresh
reserves are of lower quality. As a result, the increase in the estimated stock of recoverable
copper reserves in the 10 years to the end of 2010 was exactly half the increase between 1990
and 2000. In combination with the growth in demand, the net effect has been to shorten the
lifespan of known recoverable copper resources by a third (Figure 28). Thus, an increase in
Chinese per capita copper demand alone to meet the levels in other Asian developed countries
would require a level of output that would run down the reserve base fairly swiftly. Further,
copper supply would be obtainable only from deposits that are currently merely hypothetical.
No wonder that copper prices have increased swiftly (Figure 29).
Thus, higher prices have been needed to bring the more marginally productive raw material
supplies into the market and to regulate rather unsuccessfully the growth in demand
stemming from highly differing elasticities. The return to multi-year price highs in a variety
of commodities, despite such a sharp recession, suggests to us that demand growth is
clearly pressing against the walls of available supply and that resource depletion is an issue.
Indeed, the cyclical trough in raw material prices during the latest downturn has been more
akin to the price highs of previous cycles (ie, it remained notably high relative to historical
levels). Equally, while recent inflation pressures in EM countries have proven strong enough
to persuade policymakers in most regions to apply the brakes, we see no reason to doubt
the longer-run commitment to rising levels of prosperity in the developing world and to
achieving the maximum sustainable growth in developed economies. In our view, the most
rational conclusion to draw is that a continuing rise in global living standards in the long run
will continue to press real resources prices steadily higher. This is a necessary precondition
for an expansion of the stressed capacity and as a stimulus for successful technological
enhancement to natural resource productivity. Equally, higher real prices are required to
promote an alteration in the pattern of demand towards less resource-intensive per capita
levels of consumption. Thus, the rise in resource intensity in the developing world has
altered the long-term balance of risks for inflation. As China and other populous developing
economies pass the income threshold beyond which per capita resource consumption
starts to accelerate sharply, each incremental increase in global GDP is likely to produce a
more sizeable increase in resource prices than has been the case since the 1970s.
Figure 28: The quality of copper reserves has deteriorated

40
Reserve life of recoverable copper deposits - No of years
Figure 29: while copper prices have soared to record highs

10000
Real monthly average cash copper prices ($/t)
38
8000
36
34
6000
32
30
4000
28
26
2000
24
22
1980
1985
1990
Source: Brook Hunt, Barclays Capital
10 February 2011
1995
2000
2005
2010
0
Dec 74
Dec-83
Dec-92
Dec-01
Dec-10
70
Conclusion: Malthus revisited?

Overall, this chapter suggests that the historical demographic deflationary pressures from
commodity prices and expanding labour supply may vanish, while inflationary pressure
stemming from stronger demand for commodities may pick up. The persistent inflationary
pressures from natural resource markets will require a relative price adjustment between
the prices of commodities and other goods and services. The result will be imported
inflation for most countries that rely on commodities either as inputs (such as oil and
metals) or as consumption goods (such as food). The former would constitute a negative
supply shock, increasing the costs of production and, ultimately, of final goods. The latter
will increase the price of consumption goods directly. Overall, this would make the tasks of
central banks more challenging. All else equal, in order to maintain an unchanged inflation
target, monetary authorities would have to tighten monetary policy more than they would
in the absence of such terms-of-trade shocks. This would depress economic growth and
prices in the other sectors of the economy.
The effect would not be limited to inflation. With excess supply running always thin,
commodity prices would be subject to large fluctuations even for relatively small shocks.
Weather changes, political instability in resource-rich countries, natural disasters, technical
problems, disruption of production, may all turn out to continuously inflict large commodity
price fluctuations. This would have severe repercussions on inflation volatility and on the
economic activities employing commodities as key inputs, in addition to making it more
difficult for policymakers to stabilize their economy.
In the absence of compensating technological improvements, the constraint from limited
natural resources may bite hard in the future. The very fast rate of growth in some large
emerging markets would then support the Malthusian prediction across a broad spectrum of
commodities. Clearly, development patterns and structural change in the global economy are
moving at a sharp enough pace to necessitate some severe changes in relative prices, and
most directly in the price of commodities relative to other goods and assets, in our view.
Indeed, urbanization, a massive expansion in the size of the global middle classes and the rise
of new economic superpowers and super-regions mean that some key commodities sit right
on top of the most dynamic of the long-cycle fault-lines. It would be the equivalent of entering
diminishing returns to scale at a global level because of the limited supply of key inputs of
production: commodities. It may even soften the rate of the global economic expansion. Of
course, the effects would be highly heterogeneous across countries, potentially exacerbating
political tensions related to the control of commodity sourcing.
In sum, commodity demand may increase faster than supply can catch up, with negative
consequence for inflation, growth, and volatility. Malthus may turn out to be right, but with
broader implications than he may have imagined.
10 February 2011
71
CHAPTER 4
Simple strategies for extraordinary times

Sreekala Kochugovindan
+44 (0) 20 7773 2234
sreekala.kochugovindan@
barcap.com
Arne D. Staal
+44 (0)20 3134 7602
arne.staal@barcap.com
The past decade has been a rollercoaster ride for investors. In the past 12 months alone,
investors have been buffeted by deficit concerns in Europe, deflationary fears in the US,
and, most recently, expectations of rising inflationary pressures. Furthermore, the
response from policymakers has been unprecedented, with central banks embarking on
a mission to ease monetary policy via quantitative easing and governments under
pressure to tighten fiscal policy and tackle growing deficits once and for all. We present
simple strategies to help navigate the volatile waters of today's investment
environment: by extending the humble diversification process and focusing on riskrather than return-based allocation strategies, we believe investors can protect portfolio
returns without worrying about forecasting future returns or timing the next big correction.
Waiting for a rally to give way to a bust

The two rounds of monetary stimulus in the wake of the 2007 credit crunch have helped
fuel a very strong rally in cyclical assets. With global equity markets having risen by more
than 70% in response, the key questions posed by investors are: How long will the party
last? How sharp will the next correction be? And what is the best way to position for the
coming inflexion point?
Past extended periods of loose monetary policy may provide some lessons. In 1993, the
Federal Reserve lowered rates to 3% and maintained loose monetary policy for 17 months.
Simultaneously, the BoJ, BoE and Bundesbank also embarked on monetary easing. The US
Treasury curve bull-flattened and bond yields in the other countries declined by some
200bp. The injection of global liquidity fuelled a sharp rally in emerging market equities,
particularly in Eastern Europe. Global equity valuations moved into bubble territory.
However, as Figures 1 and 2 reveal, the policy-led bubble proved temporary. As the Fed
started to hike rates and remove stimulus in 1994, there was a complete reversal of fortune:
global bond yields rose rapidly and equity valuations fell back to pre-bubble levels.
Another example of a liquidity-driven bubble turning sour is 2003, when the Fed left rates at
1% for an extended period as fears of deflation and a double-dip recession led to bearish
sentiment. This extra liquidity was later blamed for fuelling the housing bubble and the
subsequent securitisation trend, as the low-yield environment spurred risk appetite and the
Figure 1: 10y bond yields Removal of stimulus preceded
the great bond rout of 1994
Figure 2: Equity valuations ended below pre-monetary

stimulus levels
22
9.5
9.0
21
8.5
20
8.0
7.5
19
7.0
18
6.5
17
6.0
16
5.5
5.0
Dec-92
Apr-93
Aug-93 Dec-93
Germany
Source: Ecowin
10 February 2011
Apr-94
UK
Aug-94
15
Jan-93
US
Jul-93
Jan-94
Jul-94
World x US, Forward PE

Source: Factset
72
hunt for yield. However, the removal of monetary stimulus alone was not enough to prick the
bubble, as US Treasury yields remained low amid increased demand from foreign investors,
including Asian reserve managers. Timing the risk asset correction via a Taylor rule would
have been useless in this case, despite the similarities with 1993 in terms of the conditions
that initially drove the boom. Given that it is no easier to predict the exact time and size of
the next correction in todays environment, the real question most investors face is simply
how best to position for uncertainty.
Diversifying for uncertainty

The power of diversification across asset classes, strategies, and even investment horizons
is widely recognised. One of the simplest possible approaches to diversification for a boom
and-bust scenario combines risky and safe assets in a way such that performances offset
each other and risk is stabilized. This seems straightforward in principle, but requires insight
into risks and performance over the economic cycle.
For a historical perspective, we examine asset behaviour across various economic
environments. Figure 3 outlines average real annual returns across the business cycle for US
assets since 1925 and commodity returns since the1970s. The four stages of high and low
growth and inflation are calculated as above or below trend. The analysis highlights how the
best equity and bond returns are achieved during low growth and low inflation. As
demonstrated in 2009, the sharpest stage of the rally occurs during the initial stages of a
recovery, when bonds benefit from a combination of a flight to quality and a low yield
environment. Equity returns remain strong as the economy moves out of recession, but these
returns are eroded as inflationary pressures pick up and commodities take over as the asset
class of choice. A traditional benchmark portfolio, which is dominated by equities, would have
suffered under the high inflation scenarios, despite the strong performance of commodities.
These differences in asset behaviour over time create opportunities for diversification.
Figure 3: Real annual returns across the business cycle (US data 1925-2010)
Equities
Bonds
Tbills
GSCI*
Low GDP, Low CPI
12.2%
8.8%
2.6%
-3.1%
High GDP, low CPI
10.9%
5.3%
1.2%
1.4%
High GDP, High CPI
8.2%
-1.2%
-0.9%
25.4%
Low GDP, High CPI
-1.9%
-5.0%
-1.7%
3.8%
*Note: GSCI commodities starts in 1970. Source: Barclays Capital, CRSP and GSCI
Modern portfolio approaches, such as mean-variance optimization, provide techniques to

systematically harness the power of diversification by explicitly optimizing allocations based
on the risk-return trade-off perceived in the markets. These approaches succeed or fail by the
accuracy of the estimates of risk and expected return, and many investors have found that the
resulting allocations provide less effective diversification and worse results in practice than the
theory suggests. The lack of diversification in optimized portfolios was illustrated during the
credit crisis of 2007. As the crisis unfolded and the search for a safe haven led to flight to
quality on a global scale, correlations between instruments and asset classes correlations
moved to extremes and diversification within and between many asset classes disappeared.
These approaches are also particularly sensitive to changes in expected returns, and
because of the mechanical approach to portfolio optimization, the final portfolio may not be
a true reflection of investor views. Decades of empirical analysis have led to the widespread
understanding that it is easier to accurately predict a portfolios risk than its return. This has
led to the development of more robust allocation approaches that explicitly aim to achieve
risk diversification with less focus on specific return forecasts.
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73
A risk-based approach
Risk-driven asset allocation (RDAA) is based on the idea that diversification (ie, the
allocation of capital) should be expressed in terms of the effect of asset allocation decisions
on overall portfolio risk, without the usual emphasis on expected returns. It stresses the
importance of understanding and balancing the drivers of portfolio risk. One specific
example of RDAA is known as the Risk Parity approach. This concept was born out of the
observation that equity risk dominates bond risk in balanced institutional portfolios, and is
typically used as a motivation to leverage the bond component of mixed portfolios so that
risk is equally distributed over equity and fixed income constituents. This results in a
portfolio that is overweight bonds relative to traditional 60/40 portfolios and has proven to
be a winning proposition over the past three decades. Proponents argue that Risk Parity
offers a way to engineer better risk/return trade-offs, and provides a more efficient way to
structure mixed equity/bond portfolios. Critics argue that while Risk Parity might provide a
better risk/return trade-off, the returns are also substantially lower than the traditional
benchmark portfolio. The leverage needed to compensate for the lower returns on bonds
might lead to sizable underperformance in times of rising rates. Although we agree with the
critics that there are obvious shortcomings to the simple risk-parity example, the insight
that diversification is better measured by risk impact than capital allocation is important.
The more general RDAA approach builds on the fact that diversification can be measured
and relatively accurately predicted through quantitative risk models, and still leaves room
for expected returns to be incorporated as qualitative fundamental views through the
selection of and constraints on portfolio constituents.
The most important question to answer in an RDAA framework is which risks to consider.
The sources of risk in a diversified portfolio can be defined by asset class, at the
macroeconomic level, or even through pure statistical approaches (such as principal
component analysis). Once the risk framework is determined, an investor will need to form
views on how those risks should be compensated. There are as many views on asset class
returns as there are investors. Fundamentally, asset classes should be priced according to
what the investor would pay for the future cash flows associated with the relevant
instruments. This is, of course, precisely the reason why it is so hard to come up with
useful, precise quantitative measures of expected returns; both future cash flows and the
value that investors place on them through personal discount factors are subject to great
uncertainty. An intuitive implicit assumption underlying RDAA is that when the risk of an
asset class increases, valuations come down as lower expectations of future cash flows are
discounted at a higher rate. Maintaining risk diversification over various economic
environments can help balance exposure to time-varying risk premia, resulting in better and
more stable performance,
One danger of this approach is that a perception of low risk could lead proponents to
systematically hold overvalued assets in bubble periods. We do not propose blind
adherence to a mechanical risk-based allocation rule. A focus on risk diversification should
encourage investors to look for investments that are expected to deliver appropriate
compensation for the associated risk.
Risk-weighted allocations and inflexion points

We examine the benefits of targeting risk diversification over time, rather than trying to time
the inflexion points or shifts in the business cycle. The first two examples provide a simple
comparison of a traditional benchmark portfolio with monthly rebalanced weightings of 50%,
40%, and 10% across equities, bonds, and commodities, respectively, with two rules-based
benchmark RDAA portfolios. The first is a simple monthly risk-weighted portfolio of the same
constituents; in the second, the bond component is leveraged every month to target a
constant annual portfolio volatility of 6%. We examine the performance across two decades.
First, the 1990s proved to be the best decade for US equities since the 1930s, with an average
10 February 2011
74
annual real return of 14%. Second, we examine the past 10 years, which have been one of the
worst decades for US stocks, with an average real annual return of just 0.8%. The Noughties
have, in fact, been labelled the lost decade, encompassing two major equity boom/bust
cycles. The simple risk-weighted portfolio has a tendency to underperform the traditional
benchmark portfolio in terms of overall returns when risky assets perform well. As Figure 4
and Figure 5 highlight, this is dependent on the period being examined. During the 1990s,
when equities were soaring, the traditional portfolio outperformed the simple risk-weighted
approach, given the higher weighting in stocks. However, an investor using the risk-weighted
portfolio to target a portfolio volatility of just 6% outperformed the traditional benchmark
while maintaining a lower level of risk. In 2000-10, both risk-weighted portfolios significantly
outperformed the traditional benchmark portfolio and sustained significantly lower losses
during the credit crisis. This suggests that the risk-driven asset allocation strategy can help
protect against inflexion points when markets are undergoing long-term volatile conditions.
Taking a closer look at the main inflexion points over the past decade emphasises the ability
of the risk-weighted approach to protect investors from the main turning points. Figures 6
and 7 provide a close-up of the three portfolios around the turn of the dot-com boom and
the credit crunch. In both cases, the risk-weighted approach smoothed out the portfolio risk
and return, and significantly outperformed the traditional benchmark portfolio. These
examples underline the importance of the risk-driven allocation framework in protecting
investors from sharp market corrections, without needing to pinpoint the timing of the
correction. In times of flight to quality, risk-weighting naturally leads the investor to
Figure 4: Risk-driven allocation during the 1990s
Figure 5: The lost decade: risk-driven allocation outperformed

250
350
300
200
250
200
150
150
100
100
50
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
50/40/10: SP500, 10yr bonds, GSCI

RDAA GSCI, SP500, 10yr bonds
RDAA GSCI, SP500, 10yr bonds, 6% vol target
50/40/10: SP500, 10yr bonds, GSCI

Figure 6: RDAA protected portfolios as the dotcom bubble burst
Figure 7: RDAA dampened losses during the credit crunch
140
130
130
120
120
110
110
100
100
90
90
80
80
70
70
Jan-00
Jan-01
Jan-02
Jan-03
50/40/10: SP500, 10yr bonds, GSCI

10 February 2011
60
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
50/40/10: SP500, 10yr bonds, GSCI

75
reallocate to safer assets in response to changes in valuations between asset classes.

Furthermore, it provides investors with the flexibility to target their own risk preferences; in
our example, we assume the investor wants to constrain portfolio volatility to 6%, but a
more risk-hungry investor could leverage up further.
The RDAA framework does not need to be constrained to traditional asset classes. We can
extend the approach to incorporate various alternative beta strategies and diversify further
across potential sources of portfolio returns. The inclusion of alternative beta components
in a traditional asset class portfolio could be particularly valuable now, given the longerterm drags on traditional asset returns, including the macro volatility and demographic
trends outlined in prior chapters.
Alternative beta strategies capture exposure to systematic and well understood investment
strategies that seek mainly to harvest well understood risk premia across markets. Alternative
betas extracted by hedge funds and other active investors include various equity style factors,
such as small-cap versus large-cap, value versus growth, momentum, event risk strategies,
exposure to volatility, hedging demand premiums in futures markets, and various types of
spread positions employed in rates, credit, and FX markets. They are expected to have positive
risk-adjusted returns over long horizons, but may experience severe and sustained drawdowns when risks materialise. Thus, in the absence of timing ability, diversification across
these strategies is key. Figure 8 provides an example of a risk-weighted portfolio of FX carry
and interest rate curve risk premia strategies that could be considered a further source of
returns and diversification.
Figure 8: Diversifying across strategies can provide additional return and protection
260
240
220
200
180
160
140
120
100
80
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
HRFI Composite Index TR

Diversified Risk Premia TR
50/40/10: SP500, 10yr bonds, GSCI
The FX carry strategy selects from a pool of G10 currencies, going long the highest yielders
and short the lowest. It earns the yield differential in compensation for the potential crash
risk of the high yielding currencies. It tends to perform well in normal market conditions,
but poorly in volatile ones.
The rates curve premium strategies look to earn excess return by taking longer-maturity risk.
These perform well when the yield curve is stable and upward-sloping and when yields fall
across the curve, but underperform during rates bear markets or sudden curve steepening.
Figure 8 shows that this simple diversified risk premia portfolio significantly outperforms
not only the traditional benchmark portfolio, but also the average hedge fund, as captured
by the HFR aggregate index. Diversifying risk across just two well-known alternative beta
strategies provided more stable returns and less drawdown than either the traditional
investment portfolio or the typical hedge fund during both the dotcom correction and the
credit crunch, two of the biggest equity bear markets in history. Although we have provided
10 February 2011
76
a very simple example of just two strategies, the approach can be extended to include a
number of other systematic strategies commonly used by hedge fund managers. For
example, the approach can be extended to include momentum and volatility premium
strategies across asset classes.
It is often said that the only free lunch in financial markets is portfolio diversification. RDAA
shows how the humble idea of diversification can be understood better and extended in
fundamental ways to provide portfolio protection against the current volatile financial backdrop.
Risk-driven asset allocation encourages investors to understand, select, and balance portfolio
risks through the various stages of the economic cycle. It allows investors to tailor their portfolios
to suit their own appetites for risk, and can help investors protect portfolio returns without
worrying about forecasting future returns or timing the next big downturn. It is an approach that
can be adapted in various ways by investors of all types. Indeed, with a better understanding of
risk and diversification, and less focus on pinpointing future returns, the free lunch can be even
more satisfying.
10 February 2011
77
CHAPTER 5
Dismal demographics and asset returns revisited

Michael Dicks
+44 (0) 207 751 6641
michael.dicks@barclayswealth.com
The 2005 edition of the Equity Gilt Study (EGS) contended that demographics are a
powerful driver of medium- to long-term trends in bond and equity markets. In this
edition, we re-examine the issue of demographics and asset returns more formally in
order to address criticisms of past attempts at quantifying potential linkages between
them. We find that demographics matter, though perhaps not quite as much as our
earlier work had suggested. Accordingly, our original findings that demographics
would reduce both stock and bond returns over the medium- to long-term remain
unchanged, and we still expect equities to outperform bonds over the next decade.
However, we now conclude that the equity risk premium may be 1% lower than the
historical average, whereas we formerly reckoned that it would be 1% higher.
The 2005 edition of the Equity Gilt Study (EGS) argued that most developed countries
demographics were dismal; that is, that the aging of the baby boomer generation was
likely to cause the majority of this group to switch from saving to running down
accumulated assets. 1
Such a switch in behaviour, the report noted, might have a significant impact on long-term
interest rates and the return on equities and, hence, on the equity risk premium.
There were two main reasons for this gloomy assessment:
There appeared to be a high correlation between US long-term bond yields and the
proportion of debtors (those aged 25-34) plus the retired (those over the age of 65)
divided by the proportion of those likely to be high savers (those aged 35 to 54).
Running forward official (UN) population projections by age group, for example, it
seemed likely that the ratio of debtors and retired to high savers would rise by about
one quarter over the next two decades. On the basis of the past correlation between
yields and this ratio, bond yields looked set to increase by nearly five percentage points
per decade to nearly 14% by 2025.
Equity returns, too, seemed to be highly correlated with demographic variables. In

the case of the US, a regression of real equity returns against the ratio of the high savers
group to the population as a whole, the growth rate of the retired cohort and the
growth rate of the high savers cohort, resulted in a model with three significant driving
variables and a high R-squared (of 0.79). Again, using official population projections by
age group, when such a model was run forward it produced a forecast of a huge
(>50%) decline in real returns over the next two decades.
As a check on these pessimistic forecasts, UK data were also examined in the 2005 EGS to
see if they exhibited similar correlations between demographic variables and returns. The
answer was a resounding yes. Alternative US specifications were also tried, such as
including demographics to explain the price to earnings ratio, rather than real equity
returns. Likewise, the report checked whether a life-cycle model helped explain, in a
statistical sense, fluctuations in the savings ratio. Broadly speaking, this additional work was
found to support the contention that demographics are a powerful driver of medium- to
long-term trends in bond and equity markets.
Given these findings, the framework is one that regular Equity Gilt Study readers have grown
accustomed to seeing updated each January. In last years report, for example, the analysis was
refreshed leading to the rather gloomy forecast that the acceleration in the growth of the
newly retired population, along with the shrinkage in the proportion of the population in the high
1
10 February 2011
See, in particular, Chapter 2, Equity Gilt Study (2005).
78
savings age bracket, should continue to lower the equilibrium valuation of equity markets. 2
Thus, over the next five years, the demographic-based model suggested that the US price-toearnings ratio would drop from around 16 to around 11, before recovering slightly over the next
five years. For the 2010-20 decade as a whole, (nominal) equity returns of 7% per annum were
pencilled in ie, a pace of appreciation that would be well below the historical average.
As for bond returns, the updated demographic model was still very gloomy, pointing to 20year yields drifting up from a little above 4% a year ago to close to 10% by 2020, in both the
US and the UK. Assuming a constant maturity investment in 20-year bonds, such a profile
for yields would result in returns of less than 2% per annum over the next decade and
something close to zero over the next five years. Thus the ex post equity risk premium over
the next decade would end up in the region of 5% ie, very slightly higher than the
historical average of close to 4%.
With cash rates also looking set to stay low for quite some time, a typical traditional long-only
fund comprising, say, 10% cash, 60% equities and 30% bonds looked set to deliver pretty
low returns over the next decade, of perhaps only about 5% per annum. 3 Assuming an
inflation rate of about 2% per annum over this period, real returns would end up at only about
a 3% annualised rate. This compares with a real long-run rate of return of just shy of 4% per
annum for such a fund (with long-run defined for these purposes as based on data running
back to 1900), and a return of nearly 7% per annum in real terms between 1977 and 2007.
In other words, were such a projection to turn out to be true, investors might reasonably expect
to double their real wealth only about once every 24 years, whereas, in the three decades before
the financial crisis, they were managing to do so once every 11 years.
In the rest of this paper, we consider possible pitfalls with the approach that led to those
conclusions. We then investigate, in a formal manner, how best to deal with these issues
checking if demographics really are important once other economic drivers of asset
returns have been taken into account. We find that demographics do indeed matter to both
bond and equity markets, but that they are not quite as powerful a driver as
previous editions of the EGS suggested. Our new research suggests that US bond yields will
back up to around the 7% mark over the next decade, resulting in a rate of return on US
Treasuries of around 3% per annum. It suggests that US equity markets will deliver a rate of
return of about 6% a year. Accordingly, we now judge it likely that the equity risk premium
will be around the 3% mark a little less than the historical average, rather than a
little more than average, as we had formerly thought likely.
Possible pitfalls of this sort of approach

A number of academic studies have examined how demographics might affect financial
markets. Some are rather more skeptical of there being any relationship at all. Others admit
to the likelihood of one, but argue that impacts will be much smaller than the simple Equity
Gilt Study relationships have suggested.
One stream of criticism is broadly theoretical in nature. It claims that the realization of outcomes
that are fairly easy to predict with some certainty (and over long horizons) ought not to move
markets. After all, these outcomes hardly represent news. Rather, they merely confirm what
biology made largely inevitable quite some time ago. These arguments hold weight with those
who believe that markets are largely efficient and quick to price in new information. Most
empirical studies, by contrast, find that markets do not generally fit perfectly with this notion.
Indeed, a whole new school of behavioural finance admits to the importance of psychological
drivers of human (and, hence, financial market) behaviour that sometimes lead to irrational
2
3
10 February 2011
See Chapter 1, Equity Gilt Study (2010), page 11.

With the 5% calculated as: (0.1*3%)+(0.6*7%)+(0.3*2%).
79
expectations, bubbles, mispricing and even the failure of market participants to take into
account freely available information when deciding how to trade.
A second stream of criticism of the demographics-driven studies into drivers of financial
markets warrants closer attention, in our view, because it focuses more on the data and
techniques used to estimate the proposed relationships and the alternative hypotheses that
could explain the claimed relationships. In particular, we emphasise three strands of attack:
Data issues. Most demographic analyses have been carried out on US datasets, often
using quite short runs of data. It is natural, therefore, to consider both extending data
further far back in time, to verify the robustness of claimed explanations, and extending
such studies to other countries. 4 One does, however, have to be careful. After all, it is
possible to construct an explanation of why demographic shifts might have a powerful
impact on US financial markets, but this might not necessarily be repeated elsewhere.
(For example, even though US investors strong home bias meant that their life-cycling
showed up in asset demand at home, foreign investors demographic-induced shifts
in asset demand might not reveal themselves as much in demand fluctuations for
foreign (ie, US) asset classes if their financial markets were not well developed, as their
savings would end up being channelled overseas.)
Econometric techniques used. Most studies suffer from using a set of highly
autocorrelated regressors and regressands, most of which are not stationary. In other
words, many of the variables being examined move together and in such a way that
their means vary over time. When faced with such a problem, it is important to test
formally for the order of integration of the series being examined, and to look for socalled co-integration between some subsets of the variables in the study. 5 Otherwise, it
is very easy to end up with spurious regressions that appear to suggest linkages
between variables that do not hold in reality or do so with a much weaker scale of passthrough from one driving variable to another. In other words, using the wrong
estimation technique makes it easy to bias the estimated linkages from one variable to
another or even to imagine linkages that do not exist.
Alternative hypotheses. The most damning assessments of the demographic studies

come from those who criticise researchers for data-mining ie, searching among
large datasets, with scant thought given to theory or econometric technique, until
something shows up. A better method, the critics say, would be to start with a plausible
alternative explanatory framework for what drives equity and bond returns and then see
what happens when demographics are added. 6 If demographics are really important,
they ought to help explain, in a statistical sense, either the residuals of the existing
framework ie, that element of variation in the data not explained by the other factors
or they ought to knock out the role attributed to some other factor(s) by doing a better
job of explaining past return fluctuations.
In this chapter of this years Equity Gilt Study we have decided to re-examine the issue of
demographics and asset returns more formally in order to address criticisms of past
attempts at quantifying potential linkages between them. We find that our demographic
terms come through the relevant statistical tests with flying colours, but at a cost that is,
The point about the importance of using long runs of data has been stressed by, inter alia, James Poterba. (See, for
example, The Impact of Population Aging on Financial Markets, in Global Demographic Change: Economic Impacts
and Policy Challenges, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, 2004. In our
study, we focus on US data, although we have obtained similar results for the United Kingdom (available on request).
Several international studies have found similar, though usually smaller, impacts elsewhere in the developed world. See,
for example, Do Demographic Changes Affect Risk Premiums? Evidence from International Data, by Andrew Ang and
Angela Maddaloni, ECB working paper no. 208, January 2003 and Demographics and Financial Asset Prices in the Major
Industrial Economies, by Philip Davis and Christine Li, Brunel University working paper no. 03-07, 2003.
5
This point has been emphasised by Robin Brooks in Demographic Change and Asset Prices, in Demography and
Financial Markets; Proceedings of a Conference, Reserve Bank of Australia, 2006.
6
A good example of a recent paper that emphasises the importance of getting ones theory right is Demographics
and the Term Structure of Stock Market Risk, by Carl Favero and Andrea Tamoni, Innocenzo Gasparini Institute for
Economic Research working paper no. 360, February 2010.
10 February 2011
80
the power we end up attributing to them to explain past fluctuations in bond yields and in
equity returns. Accordingly, we end up needing to amend our former projections for
medium- and long-term trends in returns on the main asset classes. Because we also end
up with a more sophisticated story to tell with more drivers of bond and equity returns
we must also consider a richer attribution process when examining past return drivers, and
a more complex set of projections, to take account not just of our best-guess (modal)
forecasts, but also of the risks around them.
A new approach
We begin by going back to a study we carried out to examine drivers of US equity returns
over the past three decades, using what might be termed a macro approach to
modelling. 7 In other words, we begin by assuming that stock market returns are largely
explained by growth (GDP), inflation and interest rates. Importantly, however, we recognise
something that Clifford Asness, the US hedge fund manager and quantitative financial
theorist, pointed out some time ago: in order to explain the equity risk premium, one needs
to consider not just the differential between the two asset classes returns, but also their
relative volatility. This, it turns out, is not just a theoretically important consideration, but
also an empirical one. This is because, when using a long run of data, one finds that the
ratio of the returns is not stationary. Accordingly, one needs an additional non-stationary
variable to help explain it. And the relative volatility does just that helping to produce a cointegrating vector.
Our main extension to the Asness analysis was to substitute for drivers of the relative return
volatilities using GDP and inflation volatility. 8 Stripping out the business cycle volatility of
these drivers (by using six- or seven-year moving averages), we found that we could come
up with fairly good models for equity and bond returns using GDP, CPI inflation, the
volatility of each, and long-term interest rates. (In some specifications, we were also able to
identify a small role for the oil price.)
Thus, to see whether demographics were up to a more difficult task ie, of being a driver of
equity and bond returns, even after making allowances for other possible explanations we
began by re-estimating our old preferred specification but using a very long run of
(annual) data, extended right back to 1900. To start with, we examined US data. Thus, we
estimated a model of the form:
log (RERI) = 1 + 2 * log (RGDP) + 3 * GDPVOL + 4 * INF + 5 * INFVOL + 6 * LR
where log stands for the natural logarithm, RERI is the real equity return index, RGDP is real
GDP, GDPVOL is a 7-year moving average of the standard deviation of annual real GDP
growth rates, INFVOL is a commensurate measure of inflation volatility, INF is the annual
inflation rate (based on the CPI) and LR is the long-term interest rate.
The various i terms are the parameters of the model, which require estimation. Time
subscripts have been dropped from all the variables for ease of notation, with current values
used for all variables. (In other words, no lags are allowed for in this relationship, as it is
intended to be used only as a means of finding a sensible long-run model for real equity
returns, with the resultant equation then used as an error correction term in a dynamic
specification when attempting to augment the equation so as to model short-term
(dynamics) of equity returns. 9) We also found it necessary to include a dummy variable,
which took the value of unity during the Second World War to help explain why equity
returns were so depressed during this period.
See Stocks versus Bonds: Explaining the Equity Risk Premium, Financial Analysts Journal, 2000.
For further details, see the article A short look at the long run, contained in our quarterly publication entitled
Signpost, Barclays Wealth Research, September 2007.
9
For more on this approach to modeling, see Dynamic Econometrics, by Hendry, David. Oxford University Press, 1995.
8
10 February 2011
81
BOX 1: A macro model of real equity returns in the US.

Dependent Variable: LOG (REQRINDEX)
Method: Least Squares
Date: 12/21/10 Time: 14:53
Sample (adjusted): 1901-2010
Included observations: 110 after adjustments
Coefficient
Std. Error
t-Statistic
Prob.
-7.660612
0.331165
-23.13230
0.0000
1.591533
0.036248
43.90708
0.0000
INF
-0.016280
0.005684
-2.864149
0.0051
GROWTHVOL
-0.053005
0.017124
-3.095278
0.0025
INFVOL
-0.105175
0.011844
-8.879929
0.0000
LR
-0.040499
0.013261
-3.053971
0.0029
DUMWW2
-0.613988
0.106389
-5.771165
0.0000
R-squared
0.984401
Mean dependent var
3.892484
Adjusted R-squared
0.983493
S.D. dependent var
1.984708
S.E. of regression
0.254998
Akaike info criterion
0.166398
Sum squared resid
6.697462
Schwarz criterion
0.338247
Hannan-Quinn criter.
0.236101
Durbin-Watson stat
0.670229
C
LOG(RGDP)
Log likelihood
-2.151895
F-statistic
1083.347
Prob(F-statistic)
0.000000
Source: Barclays Wealth Economics Research
For descriptions of the variables, please see the main text.

As a check on the models usefulness in explaining long-run trends in equity returns, we need to both eyeball the goodness of fit
shown in Figure 1 and, more important, to test it. At first glance, the model seems reasonable enough, tracking as it does the broad
trends in real returns over the past century or so. When it comes to formal testing, we first require that both the dependent variable
and at least some of the driving (explanatory) variables have the same order of integration. (Or, to use plainer language, we require
that if the returns series has a mean that rises through time as it clearly does then at least one of the explanatory series must do
so, too.) It turns out that all of the series used in the regression are integrated of order one (ie, if they are first differenced, the
resultant (delta) terms are stationary, with constant means.) So, this first test is passed easily.
Next, we require that the residuals from the regression shown in Figure 2 are a stationary series. In other words, to have
found a suitable candidate as a possible long-run equation (or co-integrating vector), we cannot have a model that makes
errors that exhibit time-varying means. Using a Dickey-Fuller test on the residuals of the model, it again turns out that the
model passes this requirement with flying colours (more formal tests, such as Johansen estimation, corroborate these
findings). Thus, we have what most econometricians would call a reasonable (or valid) model for real equity returns, which
does a pretty good job in empirical terms and makes good sense from a theoretical point of view.
Figure 1: Actual and fitted values from a "macro" model of
real equity returns
logarithm of real returns
Figure 2: Residuals from the "macro" model of real equity

returns
logarithm of real returns
0.80
d
Residuals (defined as
actual values - fitted
7
0.40
6
Fitted
0.00
4
3
-0.40
Actual
2
1
0
1900
1920
1940
1960
10 February 2011
1980
2000
-0.80
1900
1920
1940
1960
1980
2000
82
The results of estimating this model are shown in Box 1. As theory suggests, equity returns
rise when real GDP rises, and with an elasticity well above one. (In other words, when
growth takes off, equity markets really soar.) Inflation, on the other hand, detracts from
equity values. Likewise, when long-term interest rates head higher, the real value of equity
markets falls, although not by much. Last of all, the uncertainty caused by raised volatility of
either growth or inflation creates downward pressure on the stock market. The impact of
raised inflation volatility is especially powerful in this model. A doubling of volatility, for
example as has occurred since 2007 causes the stock market to be more than 10%
lower than it would otherwise have been, ceteris paribus.
So our model makes sense insofar as estimated parameter values take the sign that
theory suggests they should. More important, the model passes the relevant statistical tests
required for it to be a valid description of the long-run drivers of equity returns as detailed
in Box 1. When it comes to eye-balling the fitted values from the equation against actual
past developments, the model does a pretty good job with the gaps between fitted and
actual values (or residuals) fairly small and pretty random (Figure 1 and Figure 2). Note,
too, that the R-squared of the model is, at 0.98, much higher than that of the
aforementioned Equity Gilt Study model, of 0.79. So, at first glance at least, it would seem
that one does not need to include a role for demographics if one wants to explain equity
market moves.
Adding demographics to the mix

Having created an Aunt Sally/straw man, as it were, we next consider what happens if we
augment this model with a demographic variable based on using three separate variables:
the percentage of people aged 25-34; the percentage aged 35-54; and the percentage aged
over 60. Figure 3 shows these three variables, illustrating how the baby-boomers led to a
surge in the proportion of middle-aged people in the population during the 1980s and
1990s, which topped out around the millennium. Longer life expectancy shows up, too, in a
gentle upward drift in the proportion of people aged 65 or older. And the young workers
cohort has gone through a number of undulations in the post-war period sliding during
the early 1960s, before recovering in the 1970s and first half of the 1980s (when it peaked).
Thereafter, the proportion of people in the population aged 25-34 has fallen back to close
to where it was in the first half of the 20th century. The dotted lines in the chart show how
the United Nations projects demographic pressures to shift over the next decade with a
sharp increase in the proportion of people who are retired and a quite marked decline in the
proportion of those who are middle-aged.
Figure 3: Shifting age cohorts in the US population

% of population
35
Those aged 35 to 54
30
25
20
15
10
5
0
1900
Those aged 25 to 34
Those aged 65 or older
1920
1940
1960
1980
2000
2020
Source: United Nations and Barclays Wealth Economics Research
10 February 2011
83
Figure 4: The ratio of low to high savers.*

1.75
Forecast
The ratio of "low" savers to "high" savers

1.50
1.25
1.00
00
20
40
60
80
00
20
Note: * Defined as the ratio of those aged 25 to 34 plus those aged 65 or over to those aged 35 to 54.
Source: United Nations and Barclays Wealth Economics Research
Figure 4 shows what was proposed as a best single driver of equity returns in the 2005
Equity Gilt Study the ratio of the youngest of these three age cohorts added to the oldest,
divided by the middle one. (The idea is that the young adults group comprises mainly
debtors, who save little, if at all; the middle-aged group comprises mainly high savers; and
the retired comprises predominantly those who are running down their savings.) The
chart makes stark the big shift that has taken place in the proportion of the US populace
that was likely to be saving a high proportion of their incomes since the 1970s and early
1980s assuming, of course, that the life-cycle of consumption and savings behaviour
holds true. It also shows the subsequent collapse in this proportion thereafter, with the
nadir reached early in the 2000s. Of late, the proportion has returned to close to its pre1960s average. But it appears set to repeat the surge of the 1970s.
Using this variable as an additional potential explanatory factor driving real equity returns,
we found that it was impossible to retain all the other factors that had been found to be
statistically useful in our previous attempt. In particular, when the low-to-high savers ratio
was included in the equation, the long-term interest rate term was no longer significant (or,
for that matter, correctly signed). 10 We therefore dropped this variable from the model and
re-estimated the equation, resulting in the model shown in Box 2.
As before, the residuals from this model were tested to see if they formed an adequate from
a statistical point of view long-run model for equity returns. Again, we found that they did. In
terms of goodness of fit, this model ended up doing just as good a job as its macro rival.
Indeed, it did a slightly better one in terms of explaining past variation in equity returns. Given,
however, that most of the coefficients estimates relating to the various macro-economic
driving variables were very similar for the two specifications, the two models are very much
alike twins but for the demographic/interest rate twist.
10
Some might argue that it might make more sense to have a short-term, rather than a long-term interest rate in the
model (although we disagree, given that dividend discount models for equity valuation require long-term interest
rates in order to discount future profits/dividends). In fact, it turns out that it does not matter which type of interest
rate term is used: the results are much the same.
10 February 2011
84
BOX 2: A demographics-enhanced macro model of real equity returns in the US

Dependent Variable: LOG(REQRINDEX)
Date: 12/21/10 Time: 22:30
Coefficient
Std. Error
t-Statistic
Prob.
-6.957329
0.356383
-19.52207
0.0000
C
LOG(RGDP)
1.605916
0.034550
46.48134
0.0000
INF
-0.015819
0.005190
-3.048034
0.0029
GROWTHVOL
-0.040745
0.015303
-2.662615
0.0090
INFVOL
-0.105344
0.011114
-9.478676
0.0000
DUMWW2
-0.583508
0.099009
-5.893484
0.0000
TIMSRATIO
-0.853041
0.180194
-4.734005
0.0000
R-squared
0.986029 Mean dependent var
3.892484
Adjusted R-squared
0.985215 S.D. dependent var
1.984708
S.E. of regression
0.241330 Akaike info criterion
0.056215
Sum squared resid
5.998719 Schwarz criterion
0.228064
Log likelihood
3.908158 Hannan-Quinn criter.
0.125918
F-statistic
1211.537 Durbin-Watson stat
0.733718
Prob(F-statistic)
0.000000
Source: Barclays Wealth Economics Research.
The bottom line on equities

What about the future impact of the population share variables? Well, in this respect, the
new model suggests a rather more worrying story than in previous editions of the Equity
Gilt Study.
We start with the basic, macro-based equities return model, and run it forward using what
we deem to be reasonable values for the driving variables. We presume that real GDP
growth averages 3% per annum over the next decade; that inflation runs at 2%; that both
growth and inflation volatility decline slightly (as shown in Figure 5); and that long-term
interest rates rise gradually to 5% and then stay there. On that basis, the model predicts
nominal equity returns of just over 7% per annum ie, more or less what last years Equity
Gilt Study ended up with in terms of a modal (or best-guess) forecast.
Figure 5: GDP and inflation volatility

% points
15
Inflation vol
10
GDP vol
0
1900
1920
1940
1960
1980
2000
2020
10 February 2011
85
One might reasonably argue, however, that this projection is inconsistent with last years
EGS, which suggested that long-term interest rates were likely headed far higher than the
5% we assumed when making the projection. (Figure 7 in last years report showed 20year yields heading for double digits.) Substituting a more aggressive profile for the back-up
in bond yields causes our macro-based equity model to become more pessimistic. If yields
march all the way up to 10% by 2020, for example, then the model forecasts nominal
equity returns of only 5.5% per annum. So, it would seem that our macro-based approach
to forecasting equity returns is a shade more pessimistic than last years EGS analysis.
Next, we consider what our new demography-augmented equity returns model suggests
will happen. Using the same assumptions for its driving variables as we used above, it
predicts real returns of just 3% per annum and, thus, nominal returns of only 5% each
year. 11 Breaking down the projected returns to gauge how important the demographic
factors are in driving the forecast, we find that were the ratio of high to low savers to
remain at its current value rather than drift higher, as the UN projections suggest the
real equity return would average a rather stronger 5% per annum over the next decade,
or spot on what the macro-based model suggested would happen under the assumption
that bond yields rise substantially from here. (Or, put another way, half of the gap between
the new models forecast and last years EGS projection seems to be driven by the
demographic term and half by the macro-economic drivers.)
Of course, one way to reconcile these projections is to recognise that the two models might
be saying much the same thing if it is the case that demographics cause long-term interest
rates to head a lot higher a subject to which we turn next. After all, it may well be that it
does not matter too much whether one uses the driving force behind the rise in yields (the
shifting propensity of the population to save) or the yields themselves when modelling
equity returns. But the more important message seems to be that it is tough to envisage
long-term equity returns being as high as we thought they would be a year ago.
What about bonds?

In order to test more formally the importance of demographic terms in driving government
bond yields (and hence returns on bonds), we followed much the same approach that we
did in the case of equities starting with a macro-based approach and then seeing what
happens if we augment the model with the same demographic term that we found to be
useful, in a statistical sense, in explaining equity returns.
Rather than use the return on a government bond index as the dependent variable, we
stuck with the more conventional modelling approach of using a long-term bond yield as
the dependent variable. As for drivers, we decided to condition the model on short-term
interest rates and a slow-moving average of actual inflation; the logarithm of the CPI; and
the (budget) deficit-to-GDP ratio. (None of the volatility terms that we used successfully in
the case of modelling equities proved useful when modelling bond returns.) Given the huge
deficits run during the First and Second World Wars (Figure 6), we decided to dummy out
these periods when looking to permit the deficit-to-GDP ratio to affect bond yields.
Thus, we began by estimating a model of the form:
LR = 1 + 2 * log (CPI) + 3 * INF + 4 * DEFGDP * (1 WWDUMMY) + 5 * SR
where log stands for the natural logarithm, LR is the long-term interest rate, CPI is the
consumer price index, INF is the annual inflation rate, DEFGDP is the deficit to GDP ratio,
WWDUMMY is a dummy variable which takes the value unity during the duration of the
First and Second World Wars and SR is the short-term interest rate. As before, the various i
terms represent the parameters of the model to be estimated, and time subscripts have
been dropped so as to keep the notation simple.
11
10 February 2011
Long-term interest rate assumptions do not matter because the specification does not include a role for them.
86
Figure 6: The budget deficit as a % of GDP

% of GDP
36
27
18
9
0
-9
1900
1920
1940
1960
1980
2000
Our first, macro-based, bond model implied a powerful feed-through from changes in official
(short-term) interest rates to long-term bond yields with nearly two thirds of any rise in the
former showing up in the latter. Interestingly, this effect does not appear to have diminished
much over time, implying that the Feds signalling role when shifting its policy stance is still
regarded as exceptionally powerful.
As for trend shifts in inflation, these, too, appear to feed through to yields in the way that
theory suggests they ought, but by no means one for one. (The data strongly reject
enforcing such a restriction on the model, implying that other factors such as short-term
rates and the deficit are acting as a proxy for expected future inflation.) Last (but no less
important), changes in the budget balance to GDP ratio affect bond yields. A sustained one
percentage point rise in the budget deficit, measured as a percentage of GDP, leads to
yields rising by about 20bp. This accords with our previous research using post-war data. 12
Box 3 provides further details of the results.
Figure 7: Actual and fitted values from a "macro" model of

US bond yields
10-year yields, %
15
Figure 8: Residuals from a "macro" model of US bond yields
Residuals from the model, %

2.4
12
1.2
9
0.0
Fitted
6
-1.2
3
Actual
0
1900
1920
1940
1960
2000
-2.4
1900
1920
1940
1960
1980
2000
12
10 February 2011
1980
See Curve Advisor, by Michael Dicks and Fred Goodwin, August 2002, Lehman Brothers Economic Research
87
BOX 3: A Macro Model Of US Bond Yields

Dependent Variable: LR
Date: 12/22/10 Time: 15:39
Coefficient
Std. Error
t-Statistic
Prob.
0.373572
0.258126
1.447244
0.1508
SR
0.645309
0.034816
18.53496
0.0000
INFTARGET1000
0.271676
0.056133
4.839870
0.0000
(1-DUMWARDEF)*DEFGDP
0.206234
0.030312
6.803673
0.0000
LOG(CPI)
0.265343
0.078418
3.383716
0.0010
R-squared
4.859818
Adjusted R-squared
2.477346
S.E. of regression
2.218811
2.341560
Sum squared resid

Log likelihood
-117.0346 Hannan-Quinn criter.
2.268599
F-statistic
1.660073
Prob(F-statistic)
0.000000
As with our preferred equity model, with our macro bond equation we first tested whether
this equation was valid as a potential long-run explanatory model for bond yields, by checking
the order of integration of the driving variables and of the residuals of the model. Again we
discovered that most of the variables we used in the study required first differencing in order
to render them stationary. The budget deficit to GDP ratio was the exception in this regard: its
mean does not appear to time-vary, whatever the impression given by recent events. As for
whether the residuals from the model appear to be well behaved, the answer is a resounding
yes as indeed is evident from even a cursory glance at Figure 8.
Generally speaking, the macro-based bond yield model does a good job of tracking the
data, as shown in Figure 7. In recent years, however, it appears to have broken down, with a
stark contrast between the models ability to explain the most recent period and what it was
able to do during the 1930s. (Yields turned out much higher than the model suggested they
ought to have done during the Great Depression, but lower than expected during the Great
Recession.) One potential explanation of late has been the Feds exceptional policy effort to
provide support to the economy. (The impact of the LSAP and QE2 programmes can be
thought of as, in effect, pushing the effective short-rate below zero.) But the model went
off-track before the crisis. So it may well be that foreign purchases of Treasuries, by the
likes of Chinas State Administration of Foreign Exchange (SAFE), have also helped lower
yields relative to where they would otherwise have been, as indeed has been argued by,
among others, former Fed chairman Alan Greenspan. 13
What happens when the high to low savings rate demographic term is added to the
model? The answer, as we found with the equities equation, is that most of the driving
13
Recent Fed research suggests that 10-year yields are likely to have been lowered by some 50bp thanks to the LSAP
program. (See Flow and Stock Effects of Large-Scale Treasury Purchases, by Amico, Stefania, and King, Thomas, Fed
working paper no. 2010-52, Finance and Economics Discussion Series September 2010.) As for the impact of foreign
capital flows, Fed research published in 2005 suggested that higher-than-average foreign demand was then
responsible for yields being about 100bp lower than they would otherwise have been. See, in particular, International
Capital Flows and U.S. Interest Rates by Warnock, Francis, and Warnock, Veronica, Fed working paper no. 840,
International Finance Discussion Papers, September 2005. Add these two effects together and they sum to about
what the residuals have been over the past four or five years. Of course, when making projections but without explicitly
including these two (potential explanatory) variables, we are implicitly assuming that their impacts remain constant.
10 February 2011
88
variables retain their significance, although in the case of the slow-moving average of
inflation its significance is a little questionable, to say the least. 14 More important, the new
demographics term is found to be highly significant, and correctly signed from a theoretical
point of view. (When there are more low savers, proportionately, so yields need to rise.)
Interestingly, when the new term is added, coefficients pertaining to the budget deficit and
to trend inflation drop somewhat, while the coefficient related to the logarithm of the CPI
rises quite a lot. Box 4 provides full details.
As with the macro model, the new equation passes the tests for being a valid co-integrating
vector, with residuals that look very similar to those of the simpler macro model. And it
fits the data slightly better than when demographics are ignored. So, as with the earlier
work, it seems that the usefulness of including some aspect of the demographics story is in
no doubt. More interesting, however, is its quantitative impact.
BOX 4: A demographics-enhanced macro model of US bond yields
Dependent Variable: LR
Date: 12/22/10 Time: 15:53
Coefficient
Std. Error
t-Statistic
Prob.
-3.721908
1.090945
-3.411636
0.0009
SR
0.559918
0.039533
14.16315
0.0000
INFTARGET1000
0.123713
0.065276
1.895241
0.0608
(1-DUMWARDEF)*DEFGDP
0.122892
0.035782
3.434424
0.0009
LOG(CPI)
0.355513
0.077345
4.596481
0.0000
TIMSRATIO
3.740527
0.971436
3.850514
0.0002
R-squared
4.859818
Adjusted R-squared
2.477346
S.E. of regression
2.103720
Sum squared resid
2.251019
Log likelihood
-109.7046 Hannan-Quinn criter.
2.163465
F-statistic
1.615256
Prob(F-statistic)
0.000000
A quick look ahead

When it comes to forecasting bond yields over the next decade, a key issue concerns how
fast the Fed returns official rates to close to what might be termed an equilibrium rate ie,
the rate that is consistent with the output gap being fully closed, growth being and
expected to remain close to potential, and inflation being near its (unofficial) target (of 2%).
Very important in this regard is the current scale of the output gap. Some analysts claim
that this may be as big as 6% of GDP. (See, for example, the production-function-based
approaches taken by the CBO and OECD.) Others, including work carried out by the
Barclays Capital Research team, judge that it might be only around 4% of GDP. 15
In making our forecasts, we assume that the Fed moves official rates only slowly, getting
the Fed funds rate back to 5% by 2016, and thereafter pushing it only a little above this level
14
The t-value for this term is less than two and so not significant at a 95% confidence level. However, it is miles
above unity, which is the value required for it to reduce the standard error of the equation (and hence lower the
adjusted R-squared of the model). We therefore chose to retain it.
15
For the CBO and OECD attempts, see http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf
and http://www.oecd-ilibrary.org/economics/oecd-economic-outlook_16097408. For the recent Barclays Capital
attempt, see Beyond the cycle: Weaker growth, higher unemployment, by Newland, Peter, Economics Research
note, 15 December 2010.
10 February 2011
89
so as to avoid potential price pressures. Likewise, we assume that efforts to curb the
budget deficit begin only in 2012 and progress very gently. We assume fiscal effort of about
1% of GDP per annum thereafter, which ought to lead to a return to budget balance around
2020 or thereabouts.
The two equations provide rather different projections of what may happen over the next
decade on the basis of these assumptions for the driving variables. The raw macro model
sees 10-year yields rising to about 6% over the next decade a fairly tame back-up relative
to what was being projected as plausible in last years Equity Gilt Study (where 10% was
deemed as a reasonable expectation for 2020). The demographics-enhanced equation, by
contrast, looks for a somewhat more aggressive increase in yields, as Figure 9 shows. It
predicts that 10-year Treasury yields will be around the 7% mark in 10 years time. Of this
near-four-percentage-point back-up, it turns out that the low to high savings ratio term
explains a little over 1pp. So, demographics do matter, but so do many other things.
Figure 9: The two models forecasts for 10-year bond yields
10-year yields, %
15
12
Demographicenhanced model
9
6
Actual
3
Basic macro model
0
1900
1920
1940
1960
1980
2000
2020
Source: Barclays Wealth Economics Research.
The bottom line on bonds

What all this tells us is that the criticisms of the demography story are not really warranted.
Using a long run of data, up-to-date techniques, and testing the hypothesis against
alternatives, it turns out that demographics matter, though perhaps not quite as much as
our earlier work had suggested might be the case. This means that the aging of the baby
boomers will put additional upward pressure on bond yields depressing returns for those
holding existing stock while equities will post less impressive capital appreciation than
were the aging process to be absent or somehow held at bay. Importantly, we find it is not
just the demographics story that is pointing to lower equity returns: other macro factors
matter, such as the likelihood that potential growth has moved down a notch or two. Better
news comes from the other (macro) drivers of bond yields, which do look set to back up
markedly, but perhaps not by as much as our earlier research had suggested.
and on the equity risk premium

To complete our analysis, we also need to revise our earlier projections for equity returns to
make them consistent with what our bond model projects. When we do that by letting
yields move up to the 7% mark by 2020 we find that the macro-based model points to
nominal equity returns of just a little less than in our first run, when we simply assumed
yields would get to 5% and stay there. The average annual rate of return in nominal terms
comes out at just over 6.5%. The demographics-enhanced model, with its projection of
only 5%, does seem exceptionally gloomy. So, in the spirit of Bayesian averaging, we
10 February 2011
90
propose nudging our previous best-guess estimate of 7% down to 6%, deliberately

keeping it as a round number. 16
With the bond yield rising to perhaps 7% with, again, a weighted average of our two
models being used to come up with this round number forecast the projected average
annualised return on bonds over the next decade would only be about the 3% mark. So, it
would seem reasonable to expect that the equity risk premium might be something around
the 3% mark. This would be about 1pp lower than the historical average and 2pp lower
than we had previously thought. Thus, our message is similar to that delivered last year, but
with one new wrinkle: we still expect demographics to reduce both stock and bond returns
over the medium- to long-term and we still expect equities to outperform bonds over the
next decade or so, but the excess return may be a bit smaller (rather than slightly higher)
than in the past.
16
With the demographic model superior but not by miles, we use weights of 2/3 on it and 1/3 on the simpler macro
specification.
10 February 2011
91
CHAPTER 6
UK asset returns since 1899

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This chapter presents the real returns of the major asset classes in the UK. We analyse returns on
equities, gilts and cash from end-1899 to end-2010. Index-linked gilt returns are available from
1982, while corporate bonds begin in 1999. In order to deflate the nominal returns, a cost-ofliving index is computed, which uses the Bank of England inflation data from 1899 to 1914 and
thereafter the Retail Price Index, calculated by the Office of National Statistics.
Figure 1: Real investment returns by asset class (% pa)

2010
10 years
20 years
50 years
111 years
Equities
8.9
0.6
6.0
5.4
5.1
Gilts
4.4
2.4
5.8
2.5
1.2
Corporate bonds
3.9
2.1
N/A
N/A
N/A
Index-linked
5.3
2.4
4.3
N/A
N/A
Cash
-4.1
1.1
2.6
1.7
1.0
Note: * Entire sample. Source: Barclays Capital
Figure 1 summarises the real investment returns of each asset class over various time horizons.
The first column provides the real returns over one year, the second column the real annualised
returns over 10 years, and so on. Financial markets faced a volatile year in 2010, yet equities
managed to end the year in positive territory. Global equity indices were hit by a series of
unfortunate events, starting with the sovereign debt crisis in spring, followed by the Flash crash
in May, while the summer was dominated by fears of a double-dip recession in the US. The
announcement of a second round of quantitative easing helped fuel a year-end rally. The FTSE
all share price index had fallen 12% year-to-date by July, but managed to rally 23% for the
remainder of the year. Equities were the worst performing asset over the decade, producing a
meagre inflation-adjusted return of just 0.6%, although this is a marginal improvement over the
negative 10-year returns produced over the past two years. The effects of the dot-com crash
and the credit crunch led the noughties to be the worst decade since the stagflationary 1970s.
Gilts continued to outperform equities over the 10-year horizon and the annual performance
in 2010 was a marked improvement from the negative returns during 2009. Along with Bunds
and Treasuries, they rallied as the European sovereign debt crisis escalated in the first half of
the year. Corporate bonds performed reasonably well, although returns were far weaker than
the 16% posted during the initial stage of the risk asset recovery in 2009.
Figure 2: Real investment returns (% pa)

Equities
Gilts
Index-linked
Cash
1900-1910
4.0
-0.1
1.9
1910-20
-7.9
-10.8
-6.3
1920-30
12.8
13.1
9.8
1930-40
2.3
4.0
-1.2
1940-50
6.3
0.3
-1.1
1950-60
12.1
-4.1
-0.6
1960-70
3.3
-1.4
1.6
1970-80
0.4
-3.2
-3.1
1980-90
11.7
6.0
5.2
1990-2000
11.8
9.4
6.2
4.2
2000-2010
0.6
2.4
2.4
1.1
10 February 2011
92
Figure 2 decomposes real asset returns for consecutive 10-year intervals. Gilts produced the
best performance over the most recent decade, marginally outperforming cash. Ranking
the annual returns and placing them into deciles provides a clearer illustration of their
historical significance. The results for 2010 are shown in Figure 3. The equity portfolio is
ranked in the 5th best decile since 1899, slipping from the 2nd best decile in 2009. The
ranking for gilts has improved from the 7th to the 4th best decile. Inflation-linked bonds
moved up from 5th to the 3rd decile, despite investors being refocused on deflationary risks.
The ranking for cash fell from the 5th to the 9th decile, as yields were held near zero.
Figure 4-Figure 6 illustrate the distribution of returns over the past 111 years. They clearly
show that equity returns have the widest dispersion, followed by gilts and then cash. The
observed distributions are in accordance with financial theory; from an ex-ante perspective,
Figure 3: Comparison of 2010 real returns with historical performance ranked by decile
Decile
Equities
Gilts
Index-Linked
Cash
Notes: Deciles ranking: 1 signifies the best 10% of the history, 10 the worst 10%. Source: Barclays Capital
Figure 4: Distribution of real annual equity returns
Figure 5: Distribution of real annual gilt returns

# of observations
14
# of observations
9
8
12
7
10
6
5
1
0
-50 -42 -34 -26 -18 -10 -2 6 14 22 30 38 46 54

% annual real returns
-50 -42 -34 -26 -18 -10 -2
14 22 30 38 46 54
Figure 6: Distribution of real annual cash returns
Figure 7: Maximum and minimum real returns over different

periods
# of observations
30
Cash
Gilts
Equities
23 year
25
20 year
20
15
10 year
10
5 year
5
0
-50 -42 -34 -26 -18 -10 -2
14 22 30 38 46 54

10 February 2011
1 year
-60% -40% -20%
0%
20% 40% 60% 80% 100%
Source: Barclays Capital:
93
we would apply the highest risk premium to equities, given their perpetual nature and our
uncertainty over future growth in corporate profits and changes in the rate of inflation. For
gilts, the uncertainty with respect to inflation remains, but the risk from the perspective of
coupon and principal is reduced, given their government guarantee. Over the past 30 years,
the dispersion of annual gilt returns has widened significantly; in the 1970s and 1980s, an
unexpected increase in the inflation rate led to significant negative real returns, while in the
1990s, an unanticipated fall in inflation, in conjunction with lower government deficits,
facilitated above-average real returns. The cash return index has the lowest dispersion. In
recent years, the real returns to cash have been relatively stable, with the move towards
inflation targeting by the Bank of England stabilising the short-term real interest rate.
Performance over time

Having analysed the annual real returns since 1899, we now examine returns over various
holding periods. Figure 7 compares the annualised returns when the holding period is
extended to 5, 10 and 20 years.
The most striking feature of the chart is the change in the volatility of returns as the
investments are held for longer periods. The variance of equity returns falls significantly in
relation to the other assets as the holding period is extended. When equities are held for as
long as 20 years, the minimum return is actually greater than for either gilts or cash.
However, as discussed in previous issues of this study, we do not believe that this fall in
volatility should be interpreted as an indication of mean reversion in the returns. The series
used are of rolling returns; hence, there is an overlap in the data. For example, in the 10year holding period, nine of the annual returns will be the same in any consecutive period;
thus, the observations cannot be considered as independently drawn.
Figure 8 illustrates the performance of equities against gilts and cash for different holding
periods. The first column shows that over a holding period of two years, equities
outperformed cash in 73 out of 111 years; thus, the sample-based probability of equity
outperformance is 66%. Extending the holding period out to 10 years, this rises to 90%.
Figure 8: Equity performance
Number of consecutive years
Outperform cash
Underperform cash
Total number of years
Probability of Equity Outperformance
Outperform Gilts
Underperform Gilts
Total number of years
Probability of Equity Outperformance
10
18
73
75
78
80
92
93
37
34
30
27
10
110
109
108
107
102
94
66%
69%
72%
75%
90%
99%
76
81
82
80
81
84
10
34
28
26
27
21
110
109
108
107
102
94
69%
74%
76%
75%
79%
89%
The importance of reinvestment

Figure 9 and Figure 10 show how the reinvestment of income affects the performance of
the various asset classes. The first table shows 100 being invested at the end of 1899
without reinvesting income; the second table is with reinvestment. 100 invested in equities
at the end of 1899 would be worth just 180 in real terms without the reinvestment of
dividend income, while with reinvestment the portfolio would have grown to 24,133. The
effect upon the gilt portfolio is less in absolute terms, but the ratio of the reinvested to nonreinvested portfolio is over 300 in real terms.
10 February 2011
94
Figure 9: Todays value of 100 invested at the end of 1899

without reinvesting income
Equities
Gilts
Nominal
Real
12,655
180
49
Figure 10: Todays value of 100 invested at the end of 1899,

income reinvested gross
Equities
Nominal
Real
1,697,204
24,133
Gilts
25,916
369
Cash
20,126
286
Turning to the dividend growth ratio, Figure 11 shows that the five-year average growth rate
dipped to 1.3% as corporates began cutting dividends in 2008. Between 1997 and 2001,
dividend income had fallen a cumulative 15%, as companies cut dividends with the reasoning
that funds would be put to better use by corporates than the shareholder. In the wake of the
dot-com crash, investors actively sought income-yielding stocks as a method of lowering risk.
Figure 12 and Figure 13 illustrate the time series of price indices and total return indices for
equities, gilts and cash over the entire series. These returns are in nominal terms and are
shown with the use of a logarithmic scale.
Figure 11: Five-year average dividend growth rates

20%
15%
10%
5%
0%
-5%
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Figure 12: Barclays Capital price indices Nominal terms
Figure 13: Barclays Capital total return indices Nominal

terms, gross income reinvested
10,000,000
100000
1,000,000
10000
100,000
1000
10,000
100
1,000
10
100
1
1899 1912 1925 1938 1951 1964 1977 1990 2003
Equities
10 February 2011
Gilts
10
1899 1912 1925 1938 1951 1964 1977 1990 2003
Equities
Retail Prices
Gilts
T-Bills
95
Figure 14: Todays value of 100 invested at the end of 1945

without reinvesting income
Equities
Gilts
Nominal
Real
7,932
255
53
Figure 15: Todays value of 100 invested at the end of 1945,

gross income reinvested
Equities
Nominal
Real
136,107
4,370
Gilts
5,565
179
Cash
6,163
198
Figure 16: Todays value of 100 invested at the end of 1990, gross income reinvested
Nominal
Real
Equities
568
323
Gilts
547
311
Index-linked gilts
407
232
Treasury bills
295
168
10 February 2011
96
CHAPTER 7
US asset returns
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This is the 11th year in which we have incorporated US asset return data, kindly provided by
the Centre for Research into Security Prices (CRSP). The CRSP database continues to be
maintained by the Chicago Graduate School of Business. The first holding period covered in
the analysis below is the calendar year 1926, which would represent money invested at the
end of 1925 and its value at the end of 1926. The total sample includes 85 annual return
observations for equities, government bonds, and cash. The construction of the series is
explained in more detail in the indices in Chapter 8. The corporate bond performance is
captured using the Barclays Capital Investment Grade Corporate Long Index, which
incorporates bonds with a maturity of 10 years or more. The Barclays Capital US Inflation
Linked 15-year Plus Index is used to represent the performance of TIPS. The nominal return
series are deflated by the change in the consumer price index, which is calculated by the
Bureau of Labor Statistics.

Last
2010
10 years
20 years
50 years
85 years*
Equities
16.5
0.8
7.2
5.8
6.7
Government Bond
8.0
4.2
5.6
2.9
2.4
TIPS
7.0
6.0
Corporate Bond
9.6
5.2
5.6
Cash
-1.4
-0.2
0.9
1.2
0.6
*Note: Entire sample. Source: CRSP, Barclays Capital
Figure 1 provides the real annualised returns over various time horizons. The table
illustrates that US asset returns followed a similar trend to those of the UK set out in the
previous chapter. Equities were the best performing asset, despite periods of intense
volatility. US equities followed European stocks lower as the sovereign debt crisis unravelled
in the spring. The turbulence continued into the summer as weaker domestic economic
data triggered fears of a deflationary spiral back into recession. The Feds announcement of
a second round of quantitative easing helped fuel a recovery in global equities into yearend. Over the decade, equities underperformed all assets aside from cash.
Treasuries and TIPS performed well, as the flight-to-quality trend dominated during the
spring and summer months. Corporate bonds posted a respectable return of almost 10%,
although this was weaker than the 2009 return of 16%, as most of the liquidity premia in
corporate bonds had been eliminated during 2009. Figure 2 breaks the study period down
into consecutive decades.
Equities
Government bonds
Corporate bonds
Cash
1930-40
3.7
6.4
1.6
1940-50
7.5
-3.1
-5.1
1950-60
13.8
-0.4
0.2
1960-70
5.2
-1.5
1.3
1970-80
1.4
-3.6
-1.1
1980-90
7.9
8.8
9.5
3.9
1990-2000
14.1
7.1
6.1
1.9
2000-2010
0.8
4.2
5.2
-0.2
Source: CRSP, Barclays Capital
10 February 2011
97
Equities underperformed Treasuries and corporate bonds in the most recent decade.
Equities best decades came in the immediate aftermath of WWII and the 1990s, while the
past decade proved to be the worst in our sample. Bonds have enjoyed the strongest backto-back performance over the past three decades. Strong real bond returns are largely
explained by continued disinflation since the late 1970s.
Figure 3 ranks the relative performance of the 2010 returns by deciles, in order to get a
clearer indication of the historical significance. The US equity ranking has jumped from the
2nd best in 2009 to the 4th decile in 2010. These results are similar to the performance of UK
equities. Bonds reversed fortune and moved from the worst decile to the 3rd, while cash
returns remained weak and moved from the 10th to the 8th decile.
Figure 4, Figure 5 and Figure 6 plot the sample distributions using a histogram with identical
maximum and minimum categories across each. These charts are useful in that they allow the
reader to appreciate the volatility of each asset class while gaining an understanding of the
distribution of the annual return observations. It is clear from these figures that cash exhibits
the lowest volatility of each asset class, with bonds next and equities exhibiting the highest
dispersion of returns.
Figure 3: Comparison of 2010 real returns with historical performance ranked by decile
Decile
Equities
Government bonds
Cash
Notes: Deciles ranking - 1 signifies the best 10% of the history, 10 the worst 10%. Source: CRSP, Barclays Capital
Figure 4: Distribution of real annual cash returns
Figure 5: Distribution of real annual bond returns

# of observations
# of observations
35
12
30
10
25
20
6
15
4
10
0
-50 -40 -30 -20 -10
10
20

10 February 2011
30
40
50
60
-50 -40 -30 -20 -10
10
20
30
40
50
60

98
Figure 6: Distribution of real annual equity returns
Figure 7: Maximum and minimum real returns over different

periods
# of observations
7
Cash
Bonds
Equities
20 year
6
5
10 year
4
3
2
5 year
1
0
-50 -40 -30 -20 -10
10
20
30
40
50
60

1 year
-50%
-30%
-10%
10%
30%
50%
In Figure 7, we show the extremes of the return distribution for various holding periods. The
volatility of equities over very short horizons is shown clearly in the maximum and
minimum distribution of one-year returns. As we extend the holding period, the distribution
begins to narrow. Over the past 85 years, the worst average annualised 20-year return for
equities has been 0.9%, whilst the best is 13.2%. Is this suggesting that it is impossible to
lose money by holding equities over a 20-year period? In our view, as the analysis is
conducted on an ex-post basis, it is still possible for equities to generate negative real
returns over a 20-year period. The chart is merely highlighting the fact that such an
occurrence seems unlikely, given their performance over the past 85 years.
In addition, over the long term, we would expect the ex-ante equity risk premium to provide
a cushion against uncertainty. Over the long term, we would expect such a premium to
provide an offset against the effect of unanticipated events. Bonds and cash have
experienced negative returns over a 20-year horizon, a reflection of the unexpected jumps
in inflation, which took effect at various points in the past century.
Figure 8 plots the US equity risk premium and shows that the 10-year annualised excess
return of equities over bonds is currently negative, although it continues to bounce back
from the lows of 2008.
Figure 8: Equity-risk premium excess return of equities relative to bonds (10-yr annualised)
20%
15%
10%
5%
0%
-5%
-10%
1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
10 February 2011
99
Figure 9: Barclays Capital US price indices in nominal terms
1,000,000
Figure 10: Barclays Capital US total return indices in nominal

terms with gross income reinvested
1,000,000
10,000
1,000
100
1
1925 1935 1945 1955 1965 1975 1985 1995 2005
Equities
Bonds
1
1925 1935 1945 1955 1965 1975 1985 1995 2005
Consumer Prices
Equity
Bonds
Cash
Figure 11: Value of $100 invested at the end of 1925 without reinvesting income
Equities
Bonds
Nominal
Real
$9,524
$778
$113
$9
Figure 12: Value of $100 invested at the end of 1925 with income reinvested gross
Nominal
Real
$302,850
$24,733
Bonds
$9,296
$759
Cash
$2,040
$167
Equities
The importance of reinvestment

Figure 9 and Figure 10 show the importance of reinvestment of income, in the form of both
dividends on equity investments and coupons on government bonds.
10 February 2011
100
CHAPTER 8
Barclays indices
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We have calculated three indices: changes in the capital value of each asset class; changes
to income from these investments; and a combined measure of the overall return, on the
assumption that all income is reinvested.
Additional series allow for the effects of inflation. The data for cash include building society
deposit rates and Treasury bills. The series on index-linked securities is based at December
1982 and the corporate bond index starts at the end of 1990.
Barclays Equity Index

The Barclays Equity Index is designed to give as accurate a measure as possible of the
performance of a representative portfolio of equities. Three main types of index can be
used. The FT Index, which for years was the most widely used in the UK, is geometric,
meaning that the price changes of the 30 shares it comprises are multiplied together to
produce the change on the index. We believe that this is a fair basis for indicating short-term
market behaviour, but that over long periods it imparts a downward bias. The second type of
index uses the Dow formula, in which the prices of a number of shares are added together.
This does not have the distorting effect of a geometric index, but the weighting of the various
shares is arbitrary and varies with changes in capitalisation.
We think the most accurate and representative indices are arithmetic and weighted by the
number of shares in issue by each company. These indices include virtually all of the large
quoted companies, and thus we believe they accurately reflect the behaviour of an equity
market. The Standard & Poors Indices are of this type, and they date back to the 1920s. The
FT Actuaries Indices, introduced in the 1960s, were the first of this type in the UK.
Subsequently, a number of weighted arithmetic international indices, such as those
calculated by Morgan Stanley Capital International and Datastream, have been introduced.
More recently, the FTSE 100 Index, which uses the same construction but incorporates only
the 100 leading shares, has been introduced and, generally, is now used as the main market
indicator because it is calculated on a real-time basis throughout the day.
The new Barclays Equity Index, which is used in this study, is a weighted arithmetic index, and
is now available for the period since 1899, with a dividend yield and an income index. The
original Barclays Equity Index, used in editions of this study until 1999, was first calculated
retrospectively in 1956 and included 30 shares chosen because of their similarities to the FT
30 Index, which covers the 1935 to 1962 period. For the 2000 edition of this study, we
compiled a new index for 1899-1935, based on the 30 largest shares by market capitalisation
in each year. From 1962, the Barclays Equity Index is based on the FTSE Actuaries All-Share
Index because, with its broader coverage, it gives a more accurate picture of market
movements. The indices are only calculated annually, at year-end.
The equity returns between 1899 and 1935 are therefore calculated from a new Equity
Index, consisting of the 30 largest shares by market capitalisation in each year; between
1935 and 1962 they are calculated from the FT 30 Index and from 1962 onwards they are
derived from the FTSE Actuaries All-Share Index.
10 February 2011
101
Figure 1: Equity Index constituents

Constituents at December 1899
De Beers Consolidated Mines
Woolworth Ltd
Associated Portland Cement
Rio Tinto Ltd
Imperial Chemical Industries
Bass Mitchells & Butlers
Armstrong Whitworth
Shell' Transport & Trading Ltd
British Motor
Consolidated Gold Fields
Courtaulds Ltd
Coats Patons
London and County Bank
Royal Insurance Co
Cory (William)
London City & Midland Bank Ltd
Barclay & Company
Courtaulds
Lloyds Bank Ltd
Lloyds Bank
Distillers
London & Westminster Bank Ltd
Prudential Assurance Co Ltd
Dunlop
Vickers, Sons & Maxim Ltd
Westminster Bank Ltd
EMI
Imperial Ottoman Bank
Midland Bank Ltd
Fine Spinners & Doublers
Parrs Bank Ltd
London & Lancashire Fire Ins. Co
General Electric
Royal Insurance Co
North British & Mercantile In. Co Ltd
Guest Keen
Tharsis Sulphur & Copper Ltd
Reckitt & Sons Ltd
Hawker Siddeley
Great Northern of Copenhagen
County of London Electric Supply Co
House of Fraser
Simmer & Jack PropietaryMines Ltd
Unilever Ltd
ICI
North British & Mercantile Insurance
Tate & Lyle Ltd
Imperial Tobacco
Consett Iron Ltd
Alliance Assurance Company
International Stores
Eastern Extension Australasia * China Ltd
Boots Pure Drug Co Ltd
Leyland Motors
Nobel Dynamite TstLtd
Pearl Assurance Co
London Brick
Mysore Gold Mining Ltd
Marks & Spencer Ltd
Murex
Exploration Co
Cory (WM.) & Son
P&O Steam Navigation
Alliance Assurance Co
National Bank Of Egypt
Rolls-Royce
Aerated Bread Ltd
Consolidated Gold Fields Of South Africa
Swan Hunter
Howard & Bullough Ltd
Bass, Ratcliff & Gretton Ltd
Tate & Lyle
Sun Insurance Office
GeduldProp Mines Ltd
Tube Investments
New JagersfonteinMining & Expl Ltd
Sun Insurance Office
Turner & Newall
Champion Reef Gold Mining
Bank Of Australasia
United Steel
National Telephone Ltd
British South Africa Co
Vickers
Northern Assurance
Chartered Bank Of India, Australia & China
WatneyMann
Phoenix Assurance Co
North Eastern Elec Supply Co
Woolworth
The Equity Index is a weighted arithmetic average. In the Equity Index, the weights of the 30
constituent companies for each year are proportional to their market capitalisation at the
beginning of the year. Each year a fund was constructed. The number of shares in the fund
for each company was calculated so that its market value at the beginning of the year was
equal to the companys index weighting. The value of the fund was calculated annually at
the end of the year.
For 1899 to 1962, the Equity Income Index is based on the Barclays Equity Fund. The
Income Index relates to the dividend income actually received in the 12 months prior to the
date of the index. It is calculated by totalling the dividends paid on the shares in the fund.
We believe that it is the only published index based on actual income receipts.
From 1963 the Income Index is derived from the yield on the FTSE All-Share Index. Despite
a minimal discontinuity in the yield, in our view, this is the most representative method of
evaluating equity performance over the period. The dividend yield is quoted net from 1998,
with non-taxpayers no longer able to reclaim ACT.
10 February 2011
102
Barclays Gilt Index

The Gilt Index measures the performance of long-dated gilts. From 1899 to 1962 the index
is based on the prices of undated British funds. During this period the undated stocks were
a major part of the gilt market, but over the years the effect of high interest rates on their
prices, together with the growing number of conventional long-dated issues, meant that
undated stocks became less and less representative of the market as a whole.
Since 1962, the Barclays Gilt Index has been based on a portfolio of long-dated stocks,
selected on 1 January each year. The portfolio was chosen to represent as closely as
possible a 20-year security on a par yield, and contains a weighted combination of four
long-dated stocks with a mean life of 20 years (so that the average life of the stocks for
the year in which they are in the portfolio was 20 years). The combination and weightings
of the four stocks are chosen to have the minimum possible deviation from a par yield.
Small issues (less than 1bn) are excluded and in any year none of the four stocks has been
allocated a weight of more than 40%, or less than 5% of the index.
During the late 1980s there was a steady contraction in the number of issues that satisfied
the criteria for inclusion in the Gilt Index. As a result of the lack of issues of new long-dated
stocks and the fall in the remaining life of existing stocks, the universe of eligible stocks
narrowed sharply. By the end of 1989 there were four stocks with a life of more than 20
years, and only two of these were over 1bn nominal.
Thus from the beginning of 1990 the index has been constructed to represent a portfolio of
15-year par yielding gilts.
Barclays Inflation-linked Index

The index-linked market has now been established for almost three decades and is
capitalised at 245bn (compared with the 850bn capitalisation of the conventional
market). The index has been constructed to mirror as closely as possible the rules of the
conventional gilt index. An average life of 20 years was used up until 1990, and 15 years
thereafter. Again, stocks have been chosen to be as close to par as possible, although of
course in this case par means indexed par.
Barclays Corporate Bond Index

The UK corporate bond market has expanded dramatically since the beginning of 1999. The
index and returns are based on the Barclays Capital Sterling Aggregate Corporate Index.
Clearly, we are unable to select individual stocks for this index in the way we do for the gilt
indices because such a small sample of stocks cannot be representative of the market.
Barclays Building Society Fund

In previous editions of this study we have included indices of the value of 100 invested in a
building society at the end of 1945. We originally used the average interest rate on an
ordinary share account. In the mid-1980s many building societies introduced new tiered
interest rate accounts, which provided a higher rate of interest while still allowing instant
access. In response to this we have been tracking both types of account, but as time
progressed the old style ordinary share accounts became less and less representative and
by the mid-1990s had been completely superseded by the new accounts. From 1986 the
Barclays Index follows the Halifax Liquid Gold Account (formerly called the Halifax Instant
Xtra) as a representative of the newer tiered interest rate-style accounts. The Halifax is no
longer a building society, having converted to a bank, so from 1998 we follow the
Nationwide Invest Direct Account. This is the closest equivalent account offered by the
Nationwide Building Society (which is now the largest remaining building society in the UK);
the difference is that it is operated by post. We consider this type of postal account to be
10 February 2011
103
more representative of building society returns than the branch operated passbook
accounts, which are more in the nature of a cash-based transaction account.
US asset returns
The US indices used in this study were provided by the Center for Research in Security
Prices (CRSP) at the Graduate School of Business in the University of Chicago. The valueweighted equity index covers all common stocks trading on the New York, American and
Nasdaq Stock Exchanges, excluding ADRs. For the bond index, the CRSP has used software
which selects the bond that is closest to a 20-year bond in each month. The same
methodology has been employed for the 30-day T-Bill.
Total returns
In this study we have shown the performance of representative investments in British equities
and long gilts, with additional analysis of equivalent US returns in both monetary and real
(inflation adjusted) terms. The total returns to the investor, however, also include the income
on the investment. This is important throughout the study for comparability between asset
classes. For example, when constructing an index for a cash investment such as the Treasury
Bill Index, the 100 invested at the end of 1899 grew to approximately 104 by the end of the
following year. This full amount is reinvested and by the end of 1920 the value of this
investment had grown to about 190. In contrast, equity and bond market returns can be split
into two components: capital appreciation; and dividend income. The most commonly quoted
stock market indices usually include only the capital component of the return. In order to
calculate returns on a comparable basis, we need to include the returns obtained by
reinvesting this income. This is particularly important in looking at bonds where the scope for
capital appreciation is small, so almost all of the return will be from income. In this study total
returns are calculated assuming income is reinvested at the end of the year.
Taxation
The total return to an investor depends crucially on the tax regime. The largest long-term
investors in the British equity and gilt markets are pension funds and similar institutions
that (until the abolition of the advance corporation tax (ACT) credit) have not suffered tax
on their income or capital; our main tables therefore make no allowance for tax until 1998,
which was the first full year that non-taxpayers were unable to reclaim the ACT credit. This
effectively reduced the dividend yield to non-taxpayers, and is reflected in our main tables
and gross total return series.
The personal investor must suffer tax. The net return to a building society account is
straightforward to compute. However, changes in the tax regime in recent years make the
net return to equity and gilt investment less straightforward to calculate on a consistent
basis. For example, the change to total return taxation for gilts means that it is
inappropriate to calculate a net total return on the basis of taxing income alone. Thus
returns are quoted gross throughout, but for reference we also quote basic tax rates.
Arithmetic and geometric averages

Our analysis of past data usually relies on calculations of the geometric mean for each
series. Arithmetic averages can provide a misleading picture. For example, suppose equities
rose from a base of 100 to 200 over one year and then fell back to 100 over the next year.
The return for year one would have been 100% and for year two minus 50%. The
arithmetic average return would be 25% even though equities are actually unchanged in
value over the two years.
10 February 2011
104
The geometric average return in this example would be zero. This method of calculation is
therefore preferable. Over long periods of time the geometric average for total returns is the
rate at which a sum invested at the beginning of the period will grow to by the end of the
period, assuming all income is reinvested. The calculation of geometric averages depends
only on the initial and final values for the investment, not particular values at any other
point in time.
For periods of one year, arithmetic and geometric averages will be the same. But over
longer periods the geometric average is always less than the arithmetic average, except
when all the individual yearly returns are the same. For the mathematically minded, the
geometric return is approximately equal to the arithmetic return minus one-half the
variance of the arithmetic return.
Although geometric returns are appropriate to analyse the past, arithmetic returns should
be used to provide forecasts. Arithmetic averages provide the better unbiased estimator of
returns (for a statistical proof of this see Ian Coopers paper Arithmetic vs Geometric
Premium: setting discount rates for capital budgeting calculations, IFA Working Paper 17493, April 1993).
Figure 3: Barclays price indices in real terms
Figure 2: Barclays price indices in nominal terms

100,000
300
250
10,000
200
1,000
150
100
100
10
1
1899
50
1917
1935
Equities
1953
1971
Gilts
1989
2007
0
1899
1917
1935
Retail prices
1953
1971
Equities
1989
2007
Gilts
Figure 4: Barclays total return indices in nominal terms with

Figure 5: Barclays total return indices in real terms with

10,000,000
100,000
1,000,000
10,000
100,000
1,000
10,000
100
1,000
10
100
10
1899
1917
1935
Equities
10 February 2011
1953
Gilts
1971
1989
2007
1
1899
1917
T-Bills
1935
Equities
1953
1971
Gilts
1989
2007
T- Bills
105
Capital value indices

The indices in Figure 2 show the nominal capital value of 100 invested in equities and gilts
at the end of 1899. The chart also plots the Barclays Cost of Living Index. Note how the
equity index has correlated with increases in the cost of living versus a similar investment in
gilts. The index values at the end of 2010 were 12,655 for equities, 49 for gilts, and 7033 for
the cost of living.
We then show the same capital indices adjusted for the increase in the cost of living since
1899. Figure 3 shows the end-2010 real equity price index at 180 with the real gilt price
index at 0.7.
Total return indices

The next two charts show the nominal and real value of the equity, gilt and cash funds with
gross income received reinvested at the end of each year since 1899. Figure 4 shows that the
nominal worth of 100 invested in equities at the end of 1899 was 1,697,204. The same
investment in gilts was worth 25,916 and in T-Bills 20,126. When these values are adjusted
for inflation, the equity fund is worth 24,133, the gilt 369 and the cash fund 286.
10 February 2011
106
Figure 6: Barclays UK Cost of Living Index

Change %
Year
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
10 February 2011
December
(1899=100)
103.3
103.3
106.7
106.7
106.7
106.7
100.0
110.0
113.3
113.3
113.3
116.7
120.0
120.0
120.0
148.3
175.8
212.5
244.7
250.3
299.2
221.4
200.2
196.9
201.3
196.9
199.1
188.0
186.9
185.8
172.4
164.6
159.1
159.1
160.2
163.5
168.0
178.0
173.5
192.4
216.9
223.6
222.5
221.4
223.6
225.8
226.9
234.2
245.7
254.3
262.4
294.0
312.7
316.0
328.5
347.7
In year
3.3
0.0
3.2
0.0
0.0
0.0
-6.2
10.0
3.0
0.0
0.0
2.9
2.9
0.0
0.0
23.6
18.5
20.9
15.2
2.3
19.6
-26.0
-9.5
-1.7
2.3
-2.2
1.1
-5.6
-0.6
-0.6
-7.2
-4.5
-3.4
0.0
0.7
2.1
2.7
6.0
-2.5
10.9
12.7
3.1
-0.5
-0.5
1.0
1.0
0.5
3.2
4.9
3.5
3.2
12.0
6.3
1.1
4.0
5.8
5y average
1.3
0.6
-0.7
0.6
1.2
1.2
1.2
3.1
1.8
1.1
1.1
5.5
8.6
12.1
15.3
15.8
15.1
4.7
-1.2
-4.3
-4.3
-8.0
-2.1
-1.3
-1.0
-1.6
-2.6
-3.7
-3.3
-3.2
-2.9
-1.1
0.4
2.3
1.8
3.7
5.8
5.9
4.6
5.0
3.0
0.8
0.3
1.0
2.1
2.6
3.0
5.3
6.0
5.2
5.3
5.8
Change %
Year
December
In year
5y average
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
358.3
374.9
381.8
381.8
388.7
405.7
416.5
424.2
444.6
464.5
481.6
493.4
522.7
547.1
590.3
643.6
692.9
766.2
912.8
1140.0
1311.8
1471.1
1594.4
1869.3
2151.9
2411.2
2541.6
2676.7
2799.3
2958.5
3068.6
3182.0
3397.6
3659.5
4001.4
4180.0
4287.8
4369.3
4495.6
4640.3
4754.2
4926.6
5062.1
5151.4
5302.3
5339.2
5496.3
5650.2
5847.3
5976.6
6241.4
6493.9
6561.7
6712.5
7032.8
3.0
4.6
1.8
0.0
1.8
4.4
2.6
1.9
4.8
4.5
3.7
2.5
5.9
4.7
7.9
9.0
7.7
10.6
19.1
24.9
15.1
12.1
8.4
17.2
15.1
12.0
5.4
5.3
4.6
5.7
3.7
3.7
6.8
7.7
9.3
4.5
2.6
1.9
2.9
3.2
2.5
3.6
2.8
1.8
2.9
0.7
2.9
2.8
3.5
2.2
4.4
4.0
1.0
2.3
4.8
4.0
3.7
3.9
3.1
2.3
2.5
2.1
2.1
3.1
3.6
3.5
3.4
4.3
4.2
4.9
6.0
7.0
7.9
10.8
14.1
15.3
16.3
15.8
15.4
13.5
12.9
11.6
10.9
8.4
6.6
4.9
4.6
4.9
5.5
6.2
6.4
6.1
5.2
4.2
3.0
2.6
2.8
3.0
2.8
2.7
2.3
2.2
2.2
2.6
2.4
3.2
3.4
3.0
2.8
3.3
107
Figure 7: Barclays UK Equity Index
Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
Equity Price Index

December
100
108
100
101
98
106
105
112
107
108
115
112
109
108
100
96
96
89
93
108
116
86
80
96
92
106
117
119
124
139
113
102
77
99
119
131
144
166
138
118
114
102
119
135
144
156
160
182
170
157
141
149
153
144
170
242
10 February 2011
+8.3%
-7.9%
+1.3%
-2.7%
+8.0%
-0.7%
+6.1%
-4.7%
+1.3%
+6.3%
-2.1%
-2.9%
-1.4%
-7.1%
-4.4%
0.0%
-6.8%
+4.2%
+16.3%
+7.7%
-25.6%
-7.1%
+19.8%
-4.0%
+15.3%
+9.9%
+1.8%
+4.0%
+12.2%
-19.1%
-9.2%
-24.3%
+27.9%
+20.6%
+9.8%
+9.9%
+15.1%
-16.7%
-14.9%
-3.1%
-10.2%
+16.8%
+12.9%
+7.1%
+8.3%
+2.0%
+13.9%
-6.3%
-7.7%
-10.3%
+5.6%
+3.0%
-5.9%
+17.8%
+42.4%
Equity Income Index

December
100
69
80
66
62
71
77
79
57
73
69
71
69
57
57
36
67
66
63
34
77
79
73
72
67
73
83
76
79
90
80
65
64
60
70
78
82
93
94
90
94
91
86
86
87
88
93
107
98
103
109
121
128
134
155
-30.6%
+15.6%
-17.3%
-6.1%
+13.7%
+8.5%
+2.9%
-27.4%
+26.5%
-4.5%
+2.1%
-3.2%
-16.5%
+0.1%
-37.8%
+88.2%
-2.2%
-3.6%
-47.0%
+128.9%
+2.7%
-7.9%
-0.8%
-7.5%
+10.3%
+12.5%
-8.2%
+3.9%
+14.9%
-11.0%
-18.7%
-2.4%
-5.6%
+15.7%
+11.5%
+5.8%
+12.7%
+1.8%
-4.8%
+4.8%
-3.6%
-4.5%
-0.2%
+0.4%
+2.0%
+4.9%
+15.1%
-7.7%
+4.4%
+5.6%
+11.2%
+6.3%
+4.3%
+16.0%
Income
yield %
6.3
4.8
5.4
4.6
4.0
4.6
4.7
5.1
3.6
4.3
4.2
4.4
4.4
3.9
4.1
2.6
5.2
4.8
4.0
2.0
6.1
6.7
5.2
5.3
4.3
4.3
4.8
4.2
3.9
5.5
5.4
5.8
4.4
3.5
3.6
3.7
3.4
4.6
5.5
5.4
6.3
5.2
4.4
4.1
3.8
3.8
3.5
4.3
4.3
5.0
5.0
5.4
6.1
5.4
4.4
Equity Price Index

adjusted for
Cost of Living
100
105
97
95
92
100
99
112
97
95
101
99
94
90
83
80
64
51
44
44
46
29
36
48
47
53
59
60
66
74
61
59
47
62
75
82
88
99
78
68
59
47
53
61
65
70
71
80
73
64
55
57
52
46
54
74
+4.8%
-7.9%
-1.9%
-2.7%
+8.0%
-0.7%
+13.2%
-13.3%
-1.7%
+6.3%
-2.1%
-5.7%
-4.2%
-7.1%
-4.4%
-19.1%
-21.4%
-13.8%
+1.0%
+5.3%
-37.8%
+25.5%
+32.5%
-2.4%
+12.8%
+12.4%
+0.7%
+10.1%
+12.9%
-18.6%
-2.1%
-20.8%
+32.4%
+20.6%
+9.0%
+7.7%
+12.1%
-21.4%
-12.7%
-12.6%
-20.3%
+13.3%
+13.4%
+7.7%
+7.3%
+1.0%
+13.3%
-9.2%
-12.1%
-13.3%
+2.3%
-8.1%
-11.5%
+16.6%
+36.9%
Equity Income Index

adjusted for
Cost of Living
100
69
78
64
60
69
79
74
52
66
63
63
59
49
49
25
39
32
27
14
26
37
37
38
34
39
43
42
44
50
48
41
41
39
45
49
51
54
56
48
45
42
40
40
40
40
42
47
41
42
43
42
42
44
49
-30.6%
+11.9%
-17.3%
-6.1%
+13.7%
+15.7%
-6.4%
-29.5%
+26.5%
-4.5%
-0.8%
-5.8%
-16.5%
+0.1%
-49.7%
+58.8%
-19.1%
-16.3%
-48.2%
+91.4%
+38.8%
+1.8%
+0.9%
-9.5%
+12.7%
+11.2%
-2.8%
+4.5%
+15.6%
-4.2%
-14.8%
+1.0%
-5.6%
+14.9%
+9.2%
+3.0%
+6.4%
+4.4%
-14.2%
-7.1%
-6.5%
-4.0%
+0.3%
-0.6%
+1.0%
+4.4%
+11.6%
-12.1%
+0.8%
+2.3%
-0.7%
-0.0%
+3.2%
+11.6%
108
Year
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Equity Price Index

December
256
220
205
289
432
421
409
391
450
405
428
389
500
718
609
563
799
901
619
276
653
628
886
910
949
1206
1294
1579
1944
2450
2822
3452
3596
3829
4978
4265
4907
5635
6951
6286
7450
8320
9962
11048
13396
12329
10428
7825
9121
9961
11764
13311
13580
9129
11407
12655
10 February 2011
+5.8%
-13.9%
-7.0%
+41.1%
+49.5%
-2.6%
-3.0%
-4.4%
+15.2%
-10.0%
+5.9%
-9.3%
+28.7%
+43.5%
-15.2%
-7.5%
+41.9%
+12.8%
-31.4%
-55.3%
+136.3%
-3.9%
+41.2%
+2.7%
+4.3%
+27.1%
+7.2%
+22.1%
+23.1%
+26.0%
+15.2%
+22.3%
+4.2%
+6.5%
+30.0%
-14.3%
+15.1%
+14.8%
+23.3%
-9.6%
+18.5%
+11.7%
+19.7%
+10.9%
+21.2%
-8.0%
-15.4%
-25.0%
+16.6%
+9.2%
+18.1%
+13.2%
+2.0%
-32.8%
+25.0%
+10.9%
Equity Income Index

December
179
183
188
202
227
276
286
285
266
303
326
328
319
339
342
360
379
414
430
472
521
588
682
768
951
1073
1111
1211
1309
1578
1781
2033
2264
2628
3076
3401
3591
3573
3414
3684
4127
4536
4690
4026
4140
4007
3998
4049
4121
4428
5058
5549
5978
5974
5321
5331
+15.4%
+2.2%
+2.8%
+7.5%
+12.1%
+21.7%
+3.5%
-0.4%
-6.5%
+13.7%
+7.7%
+0.5%
-2.5%
+6.1%
+0.8%
+5.5%
+5.1%
+9.3%
+3.9%
+9.6%
+10.4%
+12.8%
+16.1%
+12.6%
+23.8%
+12.8%
+3.5%
+9.0%
+8.1%
+20.6%
+12.8%
+14.1%
+11.4%
+16.1%
+17.0%
+10.5%
+5.6%
-0.5%
-4.4%
+7.9%
+12.0%
+9.9%
+3.4%
-14.2%
+2.8%
-3.2%
-0.2%
+1.3%
+1.8%
+7.5%
+14.2%
+9.7%
+7.7%
-0.1%
-10.9%
+0.2%
Income
yield %
4.8
5.7
6.3
4.8
3.6
4.5
4.8
5.0
4.1
5.1
5.2
5.8
4.4
3.2
3.9
4.4
3.3
3.2
4.8
11.7
5.5
6.4
5.3
5.8
6.9
6.1
5.9
5.3
4.6
4.4
4.3
4.0
4.3
4.7
4.2
5.5
5.0
4.4
3.4
4.0
3.8
3.7
3.2
2.5
2.1
2.2
2.6
3.6
3.1
3.1
3.0
2.9
3.0
4.5
3.2
2.9
Equity Price Index

adjusted for
Cost of Living
74
62
55
76
113
108
101
94
106
91
92
81
101
137
111
95
124
130
81
30
57
48
60
57
51
56
54
62
73
88
95
112
113
113
136
107
117
131
159
140
161
175
202
218
260
233
195
142
161
170
197
213
209
139
170
180
-0.0%
-16.5%
-11.1%
+38.5%
+49.5%
-4.4%
-7.0%
-6.9%
+13.1%
-14.2%
+1.3%
-12.5%
+25.6%
+35.4%
-19.0%
-14.3%
+30.2%
+4.8%
-37.9%
-62.5%
+89.2%
-16.5%
+25.9%
-5.3%
-11.0%
+10.4%
-4.3%
+15.8%
+16.9%
+20.5%
+9.0%
+17.9%
+0.4%
-0.3%
+20.7%
-21.6%
+10.1%
+11.9%
+21.0%
-12.1%
+14.8%
+9.0%
+15.5%
+7.9%
+19.1%
-10.6%
-16.0%
-27.1%
+13.4%
+5.5%
+15.5%
+8.3%
-1.9%
-33.4%
+22.0%
+5.9%
Equity Income Index

adjusted for
Cost of Living
53
53
52
55
61
73
73
71
65
70
73
70
67
67
65
63
61
62
58
53
47
46
48
50
53
52
48
49
51
58
62
68
74
80
87
88
89
86
81
85
92
99
98
82
83
78
77
76
75
78
87
92
95
94
82
78
+9.1%
-0.8%
-1.7%
+5.5%
+12.1%
+19.5%
-0.8%
-3.0%
-8.2%
+8.5%
+3.1%
-3.1%
-4.8%
+0.2%
-3.7%
-2.3%
-3.6%
+1.6%
-6.0%
-8.0%
-11.6%
-2.0%
+3.5%
+3.9%
+5.6%
-2.0%
-7.6%
+3.4%
+2.7%
+15.3%
+6.8%
+10.0%
+7.4%
+8.7%
+8.7%
+1.1%
+1.1%
-3.0%
-6.2%
+4.9%
+8.5%
+7.3%
-0.2%
-16.5%
+1.0%
-5.9%
-0.9%
-1.6%
-1.0%
+3.8%
+11.8%
+5.0%
+3.5%
-1.0%
-13.0%
-4.4%
109
Figure 8: Barclays UK Gilt Index

Gilt Price Index
December
Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
10 February 2011
100.0
98.4
94.6
93.7
88.3
89.4
90.1
86.6
84.1
84.6
83.6
80.0
77.7
75.8
72.3
73.0
73.0
55.7
54.9
59.4
51.9
45.6
50.6
56.2
56.1
57.7
55.4
54.5
55.9
56.7
53.3
57.8
55.0
74.7
74.6
92.8
87.4
85.1
74.8
70.7
68.9
77.4
83.1
82.9
80.0
82.1
91.8
99.2
82.5
80.6
70.9
71.3
61.9
59.0
64.7
66.1
56.9
-1.6%
-3.8%
-0.9%
-5.8%
+1.2%
+0.8%
-3.8%
-2.9%
+0.6%
-1.3%
-4.3%
-2.8%
-2.4%
-4.7%
+1.0%
0.0
-23.8%
-1.4%
+8.3%
-12.7%
-12.1%
+11.1%
+10.9%
-0.2%
+2.9%
-3.9%
-1.6%
+2.6%
+1.3%
-6.0%
+8.5%
-4.7%
+35.6%
-0.1%
+24.4%
-5.8%
-2.6%
-12.2%
-5.4%
-2.6%
+12.3%
+7.4%
-0.3%
-3.4%
+2.6%
+11.8%
+8.0%
-16.8%
-2.3%
-12.0%
+0.5%
-13.1%
-4.8%
+9.7%
+2.2%
-13.8%
Yield %
2.8
2.9
3.0
2.9
2.8
2.8
2.9
3.0
3.0
3.0
3.1
3.2
3.3
3.5
3.4
3.4
4.5
4.6
4.2
4.8
5.5
4.9
4.4
4.5
4.3
4.5
4.6
4.5
4.4
4.7
4.3
4.5
3.3
3.3
2.7
2.9
2.9
3.3
3.5
3.6
3.2
3.0
3.0
3.1
3.0
2.7
2.5
3.0
3.1
3.5
3.5
4.0
4.2
3.9
3.8
4.4
Gilt Price Index

Adjusted for Cost of Living
100.0
95.2
91.5
87.8
82.8
83.8
84.4
86.6
76.5
74.7
73.7
70.6
66.6
63.2
60.2
60.9
49.2
31.7
25.8
24.3
20.7
15.2
22.9
28.1
28.5
28.6
28.1
27.4
29.8
30.3
28.7
33.5
33.4
46.9
46.9
57.9
53.4
50.7
42.0
40.8
35.8
35.7
37.2
37.2
36.1
36.7
40.6
43.7
35.2
32.8
27.9
27.2
21.1
18.9
20.5
20.1
16.4
-4.8%
-3.8%
-4.0%
-5.8%
+1.2%
+0.8%
+2.6%
-11.7%
-2.4%
-1.3%
-4.3%
-5.6%
-5.1%
-4.7%
+1.0%
-19.1%
-35.7%
-18.4%
-6.0%
-14.6%
-26.5%
+50.2%
+22.6%
+1.5%
+0.6%
-1.7%
-2.7%
+8.7%
+1.9%
-5.4%
+16.9%
-0.2%
+40.4%
-0.1%
+23.5%
-7.8%
-5.2%
-17.1%
-3.0%
-12.2%
-0.3%
+4.2%
+0.2%
-3.0%
+1.6%
+10.7%
+7.5%
-19.4%
-6.9%
-15.0%
-2.6%
-22.4%
-10.5%
+8.5%
-1.7%
-18.6%
110
Gilt Price Index

December
Year
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
10 February 2011
52.7
46.9
52.4
50.4
44.3
38.3
45.3
44.5
41.0
40.3
39.5
37.9
34.4
31.7
30.1
35.4
31.0
25.3
18.3
21.8
21.6
28.2
24.4
22.2
23.5
20.7
28.2
29.5
28.5
28.7
28.8
30.6
30.6
29.4
28.1
30.4
33.0
39.4
32.2
35.5
35.7
40.0
47.4
43.4
45.2
43.4
45.5
44.1
45.2
47.0
44.8
45.1
48.8
46.4
48.7
-7.5%
-10.9%
+11.7%
-3.9%
-11.9%
-13.7%
+18.3%
-1.7%
-7.9%
-1.7%
-2.1%
-4.1%
-9.3%
-7.6%
-5.2%
+17.6%
-12.3%
-18.6%
-27.5%
+19.2%
-1.1%
+30.6%
-13.3%
-9.2%
+6.2%
-12.1%
+36.2%
+4.9%
-3.4%
+0.4%
+0.4%
+6.2%
+0.0%
-3.7%
-4.5%
+8.0%
+8.7%
+19.3%
-18.1%
+10.3%
+0.6%
+11.8%
+18.6%
-8.4%
+4.0%
-3.8%
+4.8%
-3.2%
+2.5%
+3.9%
-4.6%
+0.6%
+8.3%
-5.0%
+5.0%
Yield %
4.7
5.3
4.8
5.0
5.6
6.5
5.4
5.5
6.1
6.2
6.4
6.9
7.6
8.5
9.3
8.3
9.6
11.9
17.0
14.8
15.0
10.9
13.2
14.7
13.9
15.8
11.1
10.5
10.6
10.5
10.5
9.5
9.3
10.0
10.6
9.8
8.7
6.4
8.6
7.6
7.6
6.3
4.4
5.3
4.7
5.0
4.4
4.7
4.5
4.1
4.7
4.5
3.4
4.2
3.6
Gilt Price Index

Adjusted for Cost of Living
14.7
12.5
13.7
13.2
11.4
9.4
10.9
10.5
9.2
8.7
8.2
7.7
6.6
5.8
5.1
5.5
4.5
3.3
2.0
1.9
1.6
1.9
1.5
1.2
1.1
0.9
1.1
1.1
1.0
1.0
0.9
1.0
0.9
0.8
0.7
0.7
0.8
0.9
0.7
0.8
0.8
0.8
0.9
0.8
0.9
0.8
0.8
0.8
0.8
0.8
0.7
0.7
0.7
0.7
0.7
-10.2%
-14.9%
+9.6%
-3.9%
-13.5%
-17.3%
+15.3%
-3.5%
-12.1%
-6.0%
-5.5%
-6.4%
-14.4%
-11.7%
-12.2%
+7.8%
-18.5%
-26.4%
-39.2%
-4.6%
-14.0%
+16.4%
-20.0%
-22.6%
-7.8%
-21.6%
+29.2%
-0.4%
-7.7%
-5.0%
-3.2%
+2.4%
-6.3%
-10.6%
-12.7%
+3.4%
+6.0%
+17.1%
-20.4%
+6.8%
-1.8%
+7.9%
+15.4%
-10.0%
+1.0%
-4.5%
+1.8%
-5.8%
-1.0%
+1.7%
-8.6%
-3.3%
+7.3%
-7.3%
+0.3%
111
Figure 9: Barclays UK Treasury Bill Index

Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
10 February 2011
Treasury Bill Index

December
100
104
107
110
114
117
119
123
128
130
133
137
141
144
148
153
158
162
167
172
179
190
199
204
210
217
226
237
247
257
271
278
289
293
295
297
298
300
302
304
308
311
314
317
320
324
327
328
330
332
333
335
337
344
352
359
371
+4.0%
+2.5%
+3.0%
+3.4%
+2.9%
+2.2%
+3.0%
+3.8%
+2.2%
+2.1%
+3.1%
+2.8%
+2.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.6%
+6.5%
+4.7%
+2.6%
+2.7%
+3.5%
+4.2%
+4.6%
+4.4%
+4.3%
+5.4%
+2.5%
+3.7%
+1.5%
+0.6%
+0.7%
+0.5%
+0.6%
+0.6%
+0.6%
+1.3%
+1.0%
+1.0%
+2.0%
+1.0%
+1.0%
+0.9%
+0.5%
+0.5%
+0.5%
+0.5%
+0.5%
+0.5%
+2.1%
+2.4%
+1.9%
+3.5%
Treasury Bill Index

adjusted for cost of living
100
101
103
103
106
110
112
123
116
115
118
121
121
120
124
127
106
92
79
70
71
64
90
102
107
108
115
119
131
138
146
161
175
184
185
185
182
179
170
175
160
143
140
143
145
145
145
145
141
135
131
128
115
110
111
109
107
+0.6%
+2.5%
-0.3%
+3.4%
+2.9%
+2.2%
+9.9%
-5.7%
-0.8%
+2.1%
+3.1%
-0.1%
-0.8%
+3.0%
+3.0%
-16.6%
-13.1%
-14.7%
-10.5%
+1.3%
-11.0%
+41.5%
+13.4%
+4.4%
+1.2%
+6.6%
+3.5%
+10.5%
+4.9%
+6.1%
+10.5%
+8.6%
+5.0%
+0.6%
+0.0%
-1.5%
-2.1%
-5.1%
+3.2%
-8.6%
-10.4%
-2.0%
+1.5%
+1.5%
+0.0%
-0.1%
+0.0%
-2.6%
-4.2%
-2.9%
-2.6%
-10.3%
-4.0%
+1.3%
-2.0%
-2.2%
112
Year
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
10 February 2011
Treasury Bill Index

December
390
409
430
445
467
491
513
533
556
591
627
664
714
770
828
879
927
1010
1137
1259
1402
1534
1658
1881
2204
2507
2817
3103
3399
3803
4219
4624
5133
5880
6812
7602
8322
8810
9286
9911
10522
11246
12137
12805
13601
14349
14939
15500
16211
17022
17856
18903
19891
20026
20126
+5.0%
+5.0%
+5.1%
+3.4%
+5.0%
+5.1%
+4.5%
+3.8%
+4.4%
+6.3%
+6.1%
+5.9%
+7.4%
+7.9%
+7.5%
+6.2%
+5.4%
+9.0%
+12.6%
+10.8%
+11.3%
+9.4%
+8.1%
+13.5%
+17.2%
+13.8%
+12.4%
+10.1%
+9.5%
+11.9%
+10.9%
+9.6%
+11.0%
+14.6%
+15.9%
+11.6%
+9.5%
+5.9%
+5.4%
+6.7%
+6.2%
+6.9%
+7.9%
+5.5%
+6.2%
+5.5%
+4.1%
+3.8%
+4.6%
+5.0%
+4.9%
+5.9%
+5.2%
+0.7%
+0.5%
Treasury Bill Index

adjusted for cost of living
109
109
113
117
120
121
123
126
125
127
130
135
137
141
140
137
134
132
125
110
107
104
104
101
102
104
111
116
121
129
137
145
151
161
170
182
194
202
207
214
221
228
240
249
257
269
272
274
277
285
286
291
303
298
286
+1.9%
+0.4%
+3.2%
+3.4%
+3.2%
+0.7%
+1.8%
+1.9%
-0.4%
+1.7%
+2.4%
+3.4%
+1.4%
+3.1%
-0.4%
-2.6%
-2.1%
-1.4%
-5.5%
-11.3%
-3.2%
-2.4%
-0.3%
-3.2%
+1.8%
+1.5%
+6.6%
+4.6%
+4.8%
+5.8%
+7.0%
+5.7%
+4.0%
+6.4%
+6.0%
+6.8%
+6.7%
+3.9%
+2.4%
+3.4%
+3.6%
+3.1%
+5.0%
+3.7%
+3.2%
+4.8%
+1.1%
+0.9%
+1.1%
+2.7%
+0.4%
+1.8%
+4.2%
-1.7%
-4.1%
113
Figure 10: Barclays UK Index-linked Gilt Index

Year
1982
Index Linked Gilt

Price Index December
100
Real
yield %
Money
yield %
2.7
8.3
Index Linked Gilt Price Index

adjusted for Cost of Living
100
1983
98.1
-1.9%
3.2
8.7
93.2
-6.8%
1984
101.6
+3.6%
3.3
8.1
92.3
-1.0%
1985
98.5
-3.1%
3.9
9.8
84.6
-8.3%
1986
101.4
+3.0%
4.1
7.9
84.0
-0.7%
1987
105.1
+3.6%
4.0
7.9
84.0
-0.1%
1988
116.0
+10.4%
3.8
10.8
86.8
+3.3%
1989
129.1
+11.3%
3.5
11.5
89.7
+3.3%
1990
130.8
+1.3%
4.0
13.8
83.1
-7.4%
1991
133.2
+1.8%
4.5
9.2
81.0
-2.5%
1992
151.1
+13.4%
3.9
6.6
89.6
+10.6%
1993
177.1
+17.2%
2.9
4.9
103.0
+15.0%
1994
158.3
-10.6%
4.0
7.0
89.5
-13.1%
1995
171.1
+8.1%
3.6
6.9
93.7
+4.7%
1996
176.2
+3.0%
3.6
6.1
94.2
+0.5%
1997
193.4
+9.8%
3.1
6.9
99.8
+5.9%
1998
227.4
+17.6%
2.0
4.8
114.2
+14.4%
1999
233.7
+2.8%
2.2
4.0
115.3
+1.0%
2000
235.4
+0.8%
2.3
5.3
112.9
-2.1%
2001
227.7
-3.3%
2.7
3.4
108.4
-4.0%
2002
240.7
+5.7%
2.1
5.1
111.3
+2.7%
2003
251.9
+4.7%
1.7
4.5
113.3
+1.8%
2004
267.6
+6.3%
1.7
5.3
116.3
+2.7%
2005
286.7
+7.1%
1.5
3.8
121.9
+4.8%
2006
287.0
+0.1%
1.6
6.0
116.9
-4.1%
2007
297.9
+3.8%
1.4
5.5
116.6
-0.3%
2008
290.3
-2.5%
1.4
2.3
112.5
-3.5%
2009
302.5
+4.2%
0.8
3.2
114.5
+1.8%
2010
328.3
+8.5%
0.4
5.2
118.6
+3.6%
10 February 2011
114
Figure 11: Barclays UK Equity, Gilt and Treasury Bill Funds

Equities
Year
Value of Fund
December
Gilts
Adjusted for Cost of

Living
100
Value of Fund
December
100
Treasury Bills

Living
100
Value of Fund
December
100
Adjusted for Cost

of Living
1945
100
1946
118
+17.9%
117
+17.3%
111
+10.7%
1947
115
-2.3%
111
-5.3%
95
1948
111
-3.8%
102
-8.3%
96
1949
104
-5.8%
93
-8.9%
87
1950
116
+10.9%
100
+7.4%
91
1951
126
+8.5%
97
-3.1%
82
1952
126
-0.1%
91
-6.1%
81
1953
156
+24.2%
111
+22.9%
1954
232
+48.6%
159
+42.9%
1955
257
+10.9%
167
1956
234
-9.0%
147
1957
231
-1.1%
139
-5.5%
1958
342
+47.9%
202
+45.2%
1959
529
+54.8%
313
1960
539
+1.8%
1961
548
+1.7%
1962
550
+0.4%
298
1963
659
+19.9%
351
1964
623
-5.4%
317
-9.8%
102
-2.3%
52
-6.7%
170
+4.4%
87
-0.4%
1965
694
+11.4%
337
+6.6%
107
+4.4%
52
-0.1%
181
+6.3%
88
+1.7%
1966
666
-4.0%
312
-7.4%
111
+4.2%
52
+0.5%
192
+6.1%
90
+2.4%
1967
895
+34.3%
410
+31.1%
114
+2.6%
52
+0.1%
203
+5.9%
93
+3.4%
1968
1326
+48.1%
573
+39.8%
111
-2.4%
48
-7.8%
219
+7.4%
94
+1.4%
1969
1168
-11.9%
482
-15.9%
112
+0.2%
46
-4.2%
236
+7.9%
97
+3.1%
1970
1127
-3.5%
431
-10.5%
116
+3.6%
44
-4.0%
253
+7.5%
97
-0.4%
1971
1652
+46.5%
579
+34.4%
147
+27.3%
52
+16.8%
269
+6.2%
94
-2.6%
1972
1922
+16.4%
626
+8.1%
142
-3.8%
46
-10.7%
284
+5.4%
92
-2.1%
1973
1382
-28.1%
407
-35.0%
129
-8.9%
38
-17.6%
309
+9.0%
91
-1.4%
101
100
110
+10.2%
+0.5%
100
+0.0%
-14.3%
92
-16.9%
101
+0.5%
97
-2.6%
+0.7%
88
-4.0%
102
+0.5%
93
-4.2%
-8.9%
77
-12.0%
102
+0.5%
91
-2.9%
+4.0%
78
+0.8%
103
+0.5%
88
-2.6%
-9.6%
63
-19.3%
103
+0.5%
79
-10.3%
-0.8%
59
-6.7%
105
+2.1%
76
-4.0%
93
+14.0%
66
+12.8%
108
+2.4%
77
+1.3%
98
+6.1%
67
+2.0%
110
+1.9%
75
-2.0%
+4.8%
88
-10.1%
57
-15.0%
114
+3.5%
74
-2.2%
-11.7%
85
-3.2%
54
-6.0%
119
+5.0%
75
+1.9%
80
-6.2%
48
-10.4%
125
+5.0%
75
+0.4%
94
+17.0%
55
+14.9%
132
+5.1%
78
+3.2%
+54.8%
95
+0.9%
56
+0.9%
136
+3.4%
81
+3.4%
313
-0.1%
88
-7.0%
51
-8.7%
143
+5.0%
83
+3.2%
305
-2.5%
81
-8.1%
45
-11.9%
150
+5.1%
84
+0.7%
-2.2%
101
+24.7%
55
+21.5%
157
+4.5%
85
+1.8%
+17.7%
105
+3.7%
56
+1.8%
163
+3.8%
87
+1.9%
1974
690
-50.1%
171
-58.1%
109
-15.2%
27
-28.8%
348
+12.6%
86
-5.5%
1975
1719
+149.3%
341
+99.6%
150
+36.8%
30
+9.5%
386
+10.8%
76
-11.3%
1976
1759
+2.3%
303
-11.1%
170
+13.7%
29
-1.1%
429
+11.3%
74
-3.2%
1977
2614
+48.6%
401
+32.5%
247
+44.8%
38
+29.1%
470
+9.4%
72
-2.4%
1978
2839
+8.6%
402
+0.2%
242
-1.8%
34
-9.4%
508
+8.1%
72
-0.3%
1979
3165
+11.5%
382
-4.9%
252
+4.1%
30
-11.2%
576
+13.5%
70
-3.2%
1980
4268
+34.8%
448
+17.1%
305
+20.9%
32
+5.0%
675
+17.2%
71
+1.8%
1981
4846
+13.6%
454
+1.3%
310
+1.8%
29
-9.2%
768
+13.8%
72
+1.5%
1982
6227
+28.5%
553
+21.9%
469
+51.3%
42
+43.6%
863
+12.4%
77
+6.6%
1983
8019
+28.8%
676
+22.3%
544
+15.9%
46
+10.0%
950
+10.1%
80
+4.6%
1984
10552
+31.6%
851
+25.8%
581
+6.8%
47
+2.1%
1041
+9.6%
84
+4.8%
1985
12680
+20.2%
968
+13.7%
644
+11.0%
49
+5.0%
1165
+11.9%
89
+5.8%
1986
16139
+27.3%
1188
+22.7%
715
+11.0%
53
+7.0%
1292
+10.9%
95
+7.0%
1987
17536
+8.7%
1244
+4.8%
831
+16.3%
59
+12.1%
1416
+9.6%
100
+5.7%
1988
19552
+11.5%
1299
+4.4%
909
+9.4%
60
+2.4%
1572
+11.0%
104
+4.0%
1989
26498
+35.5%
1635
+25.8%
963
+5.9%
59
-1.7%
1801
+14.6%
111
+6.4%
10 February 2011
115
Equities
Year
Value of Fund
December
Gilts

Living
Value of Fund
December
Treasury Bills

Living
Value of Fund
December
Adjusted for Cost

of Living
1990
23947
-9.6%
1351
-17.4%
1017
+5.6%
57
-3.4%
2086
+15.9%
118
+6.0%
1991
28936
+20.8%
1563
+15.7%
1209
+18.9%
65
+13.8%
2328
+11.6%
126
+6.8%
1992
34672
+19.8%
1826
+16.8%
1432
+18.4%
75
+15.4%
2549
+9.5%
134
+6.7%
1993
44207
+27.5%
2285
+25.1%
1844
+28.8%
95
+26.4%
2698
+5.9%
139
+3.9%
1994
41590
-5.9%
2089
-8.6%
1635
-11.3%
82
-13.8%
2844
+5.4%
143
+2.4%
1995
51163
+23.0%
2490
+19.2%
1945
+19.0%
95
+15.3%
3035
+6.7%
148
+3.4%
1996
59275
+15.9%
2815
+13.1%
2095
+7.7%
100
+5.1%
3222
+6.2%
153
+3.6%
1997
73263
+23.6%
3358
+19.3%
2503
+19.4%
115
+15.3%
3444
+6.9%
158
+3.1%
1998
83284
+13.7%
3715
+10.6%
3129
+25.0%
140
+21.7%
3717
+7.9%
166
+5.0%
1999
103120
+23.8%
4520
+21.7%
3018
-3.5%
132
-5.2%
3921
+5.5%
172
+3.7%
2000
97023
-5.9%
4132
-8.6%
3296
+9.2%
140
+6.1%
4165
+6.2%
177
+3.2%
2001
84226
-13.2%
3562
-13.8%
3340
+1.3%
141
+0.6%
4394
+5.5%
186
+4.8%
2002
65440
-22.3%
2689
-24.5%
3668
+9.8%
151
+6.7%
4575
+4.1%
188
+1.1%
2003
78643
+20.2%
3143
+16.9%
3725
+1.6%
149
-1.2%
4747
+3.8%
190
+0.9%
2004
88508
+12.5%
3418
+8.8%
3994
+7.2%
154
+3.6%
4964
+4.6%
192
+1.1%
2005
107609
+21.6%
4066
+18.9%
4329
+8.4%
164
+6.0%
5213
+5.0%
197
+2.7%
2006
125243
+16.4%
4531
+11.4%
4323
-0.1%
156
-4.4%
5468
+4.9%
198
+0.4%
2007
131639
+5.1%
4577
+1.0%
4550
+5.2%
158
+1.2%
5789
+5.9%
201
+1.8%
2008
92460
-29.8%
3185
-30.4%
5135
+12.9%
177
+11.8%
6091
+5.2%
210
+4.2%
2009
119238
+29.0%
4011
+25.9%
5087
-1.0%
171
-3.3%
6133
+0.7%
206
-1.7%
2010
136107
+14.1%
4370
+8.9%
5565
+9.4%
179
+4.4%
6163
+0.5%
198
-4.1%
Note: Original Investment of 100 December 1945, gross income reinvested.
10 February 2011
116
Figure 12: Barclays UK Treasury Bills and Building Society Accounts
Year
Building
Basic Rate
Income Tax
Treasury Bills Society Acc.
Annual Return Annual Rate of Calendar Year
%
Interest
Average
Year
1980
Basic Rate
Treasury Bills Building Society Income Tax
Annual Return Acc. Annual rate Calendar Year
%
of Interest
Average
17.17
15.00
30.00
1981
13.76
12.94
30.00
1982
12.38
12.19
30.00
1983
10.14
9.64
30.00
1984
9.55
9.99
30.00
1985
11.87
10.81
30.00
1946
0.51
6.51
46.25
1986
10.95
10.55
29.26
1947
0.51
6.36
45.00
1987
9.58
9.66
27.50
1948
0.51
6.36
45.00
1988
11.01
8.26
25.50
1949
0.52
6.36
45.00
1989
14.55
10.71
25.00
1950
0.52
6.36
45.00
1990
15.86
12.04
25.00
1951
0.52
4.82
46.88
1991
11.59
9.32
25.00
1952
2.09
4.65
47.50
1992
9.47
9.59
24.68
1953
2.36
4.60
45.62
1993
5.86
4.12
24.50
1954
1.89
4.55
45.00
1994
5.40
3.69
20.00
1955
3.50
4.69
43.12
1995
6.74
3.93
20.00
1956
5.02
5.44
42.50
1996
6.16
2.61
20.00
1957
5.01
6.09
42.50
1997
6.88
3.06
20.00
1958
5.11
6.09
42.50
1998
7.92
7.06
20.00
1959
3.42
5.59
39.69
1999
5.51
5.11
23.00
1960
5.04
5.52
38.75
2000
6.22
5.50
22.00
1961
5.14
5.81
38.75
2001
5.50
4.70
22.00
1962
4.46
6.12
38.75
2002
4.12
3.40
22.00
1963
3.80
5.81
38.75
2003
3.75
3.33
22.00
1964
4.40
5.71
38.75
2004
4.59
4.21
22.00
1965
6.29
6.50
40.62
2005
5.00
3.95
22.00
1966
6.12
6.81
41.25
2006
4.90
4.36
22.00
1967
5.90
7.23
41.25
2007
5.87
4.77
22.00
1968
7.43
7.52
41.25
2008
5.23
0.85
20.00
1969
7.93
8.29
41.25
2009
0.68
0.25
20.00
1970
7.45
8.51
41.25
2010
0.50
0.20
20.00
1971
6.18
8.25
39.38
1972
5.42
8.16
38.75
1973
9.01
9.70
32.19
1974
12.56
11.07
32.25
1975
10.75
11.01
34.50
1976
11.34
10.65
35.00
1977
9.44
10.65
34.25
1978
8.06
9.42
33.25
1979
13.45
12.22
30.75
Note:
1. Annual returns on treasury bills are based on four consecutive investments in 91-day bills.
2. The building society rate of interest above is gross of tax.
10 February 2011
117
Figure 13: Barclays Index-linked Funds

Index Linked gilts
Value of Fund
December
Adjusted for
Cost of Living
1982
100
1983
101
+0.8%
100
96
-4.3%
1984
107
+6.6%
98
+1.9%
1985
107
-0.2%
92
-5.5%
1986
114
+6.1%
94
+2.3%
1987
122
+6.9%
97
+3.1%
1988
138
+13.7%
103
+6.5%
1989
158
+14.5%
110
+6.3%
1990
165
+4.4%
105
-4.5%
1991
174
+5.2%
106
+0.7%
1992
204
+17.1%
121
+14.1%
1993
247
+21.1%
144
+18.9%
1994
227
-7.9%
128
-10.5%
1995
254
+12.0%
139
+8.5%
1996
271
+6.5%
145
+4.0%
1997
307
+13.4%
158
+9.4%
1998
369
+20.3%
186
+17.1%
1999
388
+5.0%
191
+3.2%
2000
400
+3.1%
192
+0.1%
2001
396
-0.9%
189
-1.6%
2002
428
+8.2%
198
+5.1%
2003
457
+6.8%
206
+3.9%
2004
497
+8.6%
216
+4.9%
2005
542
+9.1%
231
+6.7%
2006
554
+2.3%
226
-2.1%
2007
585
+5.5%
229
+1.4%
2008
578
-1.2%
224
-2.1%
2009
610
+5.6%
231
+3.1%
2010
673
+10.3%
243
+5.3%
10 February 2011
118
Figure 14: Barclays US Equity Index
Year
Equity Price Index

December
Equity Income Index

December
1925
100
1926
104
+4.2%
100
1927
133
+27.3%
143
1928
177
+33.7%
167
1929
145
-18.2%
79
1930
99
-32.1%
56
1931
52
-47.7%
1932
44
-14.5%
1933
67
1934
67
1935
Income
Yield %
Equity Price Index

Living
Equity Income Index

Living
100
5.5
105
+5.4%
100
+43.3%
6.2
137
+30.2%
146.5985
+46.6%
+16.4%
5.4
186
+35.2%
172.6287
+17.8%
-52.4%
3.1
151
-18.6%
81.75549
-52.6%
-29.3%
3.3
110
-27.4%
61.78934
-24.4%
30
-47.1%
3.3
63
-42.3%
36.06677
-41.6%
47
+56.7%
6.0
60
-4.7%
62.9825
+74.6%
+51.1%
75
+60.6%
6.4
90
+49.9%
100.3819
+59.4%
+0.1%
49
-34.7%
4.2
89
-1.4%
64.56871
-35.7%
93
+39.0%
95
+94.2%
5.9
120
+35.0%
121.7487
+88.6%
1936
117
+26.5%
116
+21.8%
5.6
150
+24.7%
146.1842
+20.1%
1937
73
-38.1%
44
-61.9%
3.5
90
-39.8%
54.1931
-62.9%
1938
89
+22.7%
84
+91.5%
5.4
114
+26.2%
106.7559
+97.0%
1939
87
-2.6%
72
-14.6%
4.8
111
-2.6%
91.22098
-14.6%
1940
76
-12.7%
69
-3.8%
5.2
96
-13.3%
87.12327
-4.5%
1941
64
-15.7%
68
-2.0%
6.1
74
-23.3%
77.67114
-10.8%
1942
69
+8.7%
93
+36.3%
7.6
73
-0.3%
97.0832
+25.0%
1943
84
+21.7%
94
+1.7%
6.4
87
+18.2%
95.92084
-1.2%
1944
97
+15.5%
100
+6.3%
5.9
98
+12.9%
99.67736
+3.9%
1945
129
+32.9%
125
+24.5%
5.5
127
+30.0%
121.3657
+21.8%
1946
117
-9.7%
78
-37.4%
3.8
97
-23.6%
64.27848
-47.0%
1947
114
-2.2%
112
+43.3%
5.6
87
-10.2%
84.6293
+31.7%
1948
110
-3.9%
120
+7.1%
6.2
82
-6.7%
88.02723
+4.0%
1949
123
+12.1%
172
+43.1%
8.0
93
+14.5%
128.6618
+46.2%
1950
149
+21.3%
227
+32.3%
8.7
107
+14.5%
160.7312
+24.9%
1951
171
+14.2%
199
-12.3%
6.7
115
+7.7%
132.9688
-17.3%
1952
183
+7.4%
190
-4.6%
5.9
123
+6.6%
125.9675
-5.3%
1953
174
-5.1%
165
-13.4%
5.4
116
-5.8%
108.3046
-14.0%
1954
249
+43.1%
307
+86.4%
7.0
167
+44.2%
203.3685
+87.8%
1955
299
+20.3%
263
-14.4%
5.0
200
+19.8%
173.4251
-14.7%
1956
312
+4.3%
230
-12.5%
4.2
202
+1.2%
147.3988
-15.0%
1957
268
-14.1%
175
-24.0%
3.7
169
-16.5%
108.8595
-26.1%
1958
374
+39.3%
361
+106.4%
5.5
231
+36.9%
220.8343
+102.9%
1959
407
+9.0%
255
-29.3%
3.6
248
+7.2%
153.5392
-30.5%
1960
398
-2.2%
237
-7.2%
3.4
239
-3.6%
140.5374
-8.5%
1961
491
+23.3%
313
+32.3%
3.6
293
+22.5%
184.6736
+31.4%
1962
426
-13.3%
222
-29.2%
3.0
251
-14.4%
129.1071
-30.1%
1963
499
+17.1%
330
+49.0%
3.8
289
+15.2%
189.2013
+46.5%
1964
563
+12.8%
340
+2.9%
3.5
323
+11.8%
192.8581
+1.9%
1965
624
+11.0%
370
+9.0%
3.4
351
+8.9%
206.2102
+6.9%
1966
551
-11.7%
289
-22.1%
3.0
300
-14.6%
155.3255
-24.7%
1967
688
+24.7%
462
+60.1%
3.8
363
+21.0%
241.2677
+55.3%
1968
763
+10.9%
433
-6.2%
3.2
385
+5.9%
216.1173
-10.4%
1969
660
-13.5%
309
-28.8%
2.7
313
-18.6%
144.948
-32.9%
10 February 2011
119
Equity Price Index

December
Year
Equity Income Index

December
Income
Yield %
Equity Price Index

Living
Equity Income Index

Living
1970
637
-3.4%
388
+25.6%
3.5
287
-8.5%
172.5109
+19.0%
1971
719
+12.8%
426
+9.7%
3.4
313
+9.2%
183.3158
+6.3%
1972
822
+14.3%
443
+4.1%
3.1
346
+10.5%
184.6129
+0.7%
1973
647
-21.2%
275
-38.0%
2.4
251
-27.5%
105.2256
-43.0%
1974
446
-31.1%
244
-11.3%
3.1
154
-38.6%
83.07757
-21.0%
1975
588
+31.8%
570
+134.1%
5.5
190
+23.3%
181.8333
+118.9%
1976
717
+21.9%
609
+6.8%
4.9
221
+16.3%
185.2142
+1.9%
1977
665
-7.3%
503
-17.5%
4.3
192
-13.1%
143.2858
-22.6%
1978
687
+3.3%
631
+25.6%
5.3
182
-5.3%
165.0508
+15.2%
1979
812
+18.3%
870
+37.8%
6.1
190
+4.4%
200.7895
+21.7%
1980
1033
+27.1%
1104
+26.9%
6.1
214
+13.0%
226.4601
+12.8%
1981
947
-8.4%
724
-34.5%
4.4
180
-15.9%
136.2508
-39.8%
1982
1081
+14.2%
1168
+61.5%
6.2
198
+10.0%
211.8722
+55.5%
1983
1275
+17.9%
1062
-9.1%
4.8
225
+13.6%
185.5656
-12.4%
1984
1260
-1.1%
950
-10.5%
4.3
214
-4.9%
159.712
-13.9%
1985
1594
+26.5%
1380
+45.2%
4.9
261
+21.8%
223.4314
+39.9%
1986
1781
+11.8%
1176
-14.8%
3.8
289
+10.6%
188.3505
-15.7%
1987
1757
-1.4%
980
-16.7%
3.2
273
-5.5%
150.3112
-20.2%
1988
1985
+13.0%
1589
+62.2%
4.6
295
+8.2%
233.4435
+55.3%
1989
2462
+24.0%
1897
+19.4%
4.4
350
+18.5%
266.3303
+14.1%
1990
2231
-9.4%
1291
-32.0%
3.3
298
-14.6%
170.7964
-35.9%
1991
2892
+29.6%
2029
+57.1%
4.0
375
+25.8%
260.3902
+52.5%
1992
3069
+6.1%
1583
-22.0%
2.9
387
+3.1%
197.4137
-24.2%
1993
3339
+8.8%
1630
+3.0%
2.8
410
+5.9%
197.8275
+0.2%
1994
3230
-3.3%
1427
-12.4%
2.5
386
-5.8%
168.7149
-14.7%
1995
4279
+32.5%
2368
+66.0%
3.2
499
+29.2%
273.0742
+61.9%
1996
5082
+18.8%
2142
-9.5%
2.4
574
+14.9%
239.0757
-12.5%
1997
6513
+28.2%
2465
+15.1%
2.2
723
+26.0%
270.4523
+13.1%
1998
7850
+20.5%
2413
-2.1%
1.8
857
+18.6%
260.5785
-3.7%
1999
9707
+23.7%
2748
+13.9%
1.6
1032
+20.4%
289.0536
+10.9%
2000
8536
-12.1%
1460
-46.9%
1.0
878
-14.9%
148.505
-48.6%
2001
7474
-12.4%
1538
+5.4%
1.2
757
-13.8%
154.107
+3.8%
2002
5821
-22.1%
1292
-16.0%
1.3
576
-23.9%
126.3737
-18.0%
2003
7613
+30.8%
3140
+143.1%
2.4
739
+28.4%
301.5195
+138.6%
2004
8439
+10.8%
3178
+1.2%
2.2
794
+7.4%
295.6017
-2.0%
2005
8895
+5.4%
2999
-5.6%
1.9
809
+1.9%
269.7308
-8.8%
2006
10145
+14.0%
3835
+27.9%
2.2
900
+11.2%
336.3746
+24.7%
2007
10678
+5.3%
3772
-1.7%
2.0
910
+1.1%
317.8441
-5.5%
2008
6443
-39.67%
1623
-56.98%
1.4
549
-39.72%
136.6126
-57.02%
2009
8255
+28.13%
4631
+185.41%
3.2
684
+24.74%
379.5804
+177.85%
2010
9524
+15.39%
4135
-10.68%
2.5
778
+13.69%
333.9069
-12.00%
10 February 2011
120
Figure 15: Barclays US Bond Index

Bond Price Index
December
Year
Yield %
Bond Price Index

1925
100
100
1926
104
+3.9%
3.5
105
+5.1%
1927
110
+5.4%
3.2
113
+7.8%
1928
106
-3.1%
3.4
111
-2.0%
1929
106
-0.2%
3.4
110
-0.8%
1930
107
+1.3%
3.3
119
+8.2%
1931
98
-8.5%
4.1
120
+0.9%
1932
111
+12.9%
3.2
151
+25.8%
1933
107
-3.1%
3.4
146
-3.9%
1934
115
+6.8%
2.9
153
+5.2%
1935
117
+2.1%
2.8
152
-0.8%
1936
122
+4.6%
2.6
157
+3.1%
1937
119
-2.5%
2.7
148
-5.2%
1938
123
+2.8%
2.5
157
+5.8%
1939
127
+3.5%
2.3
163
+3.5%
1940
132
+3.8%
1.9
167
+3.0%
1941
131
-1.0%
2.0
151
-10.0%
1942
131
+0.7%
2.4
139
-7.6%
1943
131
-0.4%
2.5
135
-3.3%
1944
131
+0.3%
2.4
132
-1.9%
1945
142
+8.1%
2.0
140
+5.8%
1946
139
-2.4%
2.1
115
-17.4%
1947
132
-4.9%
2.4
101
-12.6%
1948
133
+0.9%
2.4
99
-2.0%
1949
138
+4.0%
2.1
105
+6.2%
1950
135
-2.3%
2.2
97
-7.8%
1951
127
-6.3%
2.7
86
-11.6%
1952
125
-1.4%
2.8
84
-2.1%
1953
126
+0.9%
2.7
84
+0.2%
1954
131
+4.1%
2.6
88
+4.9%
1955
126
-3.6%
3.0
84
-4.0%
1956
115
-9.1%
3.4
75
-11.7%
1957
120
+4.7%
3.2
76
+1.8%
1958
110
-8.4%
3.8
68
-10.0%
1959
103
-6.4%
4.4
63
-8.0%
1960
112
+9.0%
3.8
68
+7.5%
1961
109
-3.4%
4.0
65
-4.0%
1962
113
+4.0%
3.8
67
+2.6%
1963
108
-4.3%
4.1
63
-5.8%
1964
109
+0.4%
4.1
62
-0.6%
1965
104
-3.9%
4.4
59
-5.7%
1966
104
+0.0%
4.5
57
-3.3%
1967
94
-9.9%
5.2
50
-12.6%
1968
89
-14.9%
5.7
45
-21.1%
1969
79
-11.1%
6.6
37
-16.3%
10 February 2011
121
Bond Price Index

December
Year
Yield %
Bond Price Index

1970
85
+7.0%
6.2
38
+1.4%
1971
95
+12.2%
4.5
41
+8.6%
1972
96
+1.3%
4.5
40
-2.1%
1973
88
-8.8%
7.1
34
-16.1%
1974
84
-3.8%
7.7
29
-14.4%
1975
83
-1.7%
7.7
27
-8.0%
1976
91
+9.8%
6.9
28
+4.7%
1977
86
-6.0%
7.5
25
-11.9%
1978
77
-10.3%
8.8
20
-17.7%
1979
69
-10.0%
9.9
16
-20.5%
1980
60
-13.3%
11.6
12
-22.9%
1981
53
-11.5%
13.7
10
-18.7%
1982
65
+23.3%
10.5
12
+18.8%
1983
59
-9.4%
11.6
10
-12.7%
1984
61
+2.5%
11.3
10
-1.4%
1985
72
+18.7%
9.3
12
+14.3%
1986
84
+16.1%
7.6
14
+14.8%
1987
75
-11.0%
8.8
12
-14.8%
1988
74
-0.6%
8.8
11
-4.8%
1989
81
+9.5%
7.9
12
+4.6%
1990
79
-2.8%
8.2
11
-8.4%
1991
86
+9.1%
7.3
11
+5.9%
1992
86
-0.3%
7.3
11
-3.1%
1993
93
+8.8%
6.4
11
+5.9%
1994
80
-14.3%
7.9
10
-16.5%
1995
97
+21.1%
5.9
11
+18.1%
1996
90
-7.0%
6.6
10
-10.0%
1997
97
+7.7%
5.9
11
+5.9%
1998
103
+6.1%
5.3
11
+4.4%
1999
88
-14.5%
6.7
-16.8%
2000
100
+13.3%
5.5
10
+9.6%
2001
98
-2.1%
5.7
10
-3.6%
2002
108
+10.5%
4.8
11
+7.9%
2003
105
-2.9%
5.0
10
-4.7%
2004
107
+2.4%
4.8
10
-0.8%
2005
110
+2.2%
4.6
10
-1.2%
2006
105
-4.1%
4.8
-6.5%
2007
109
+4.1%
4.5
-0.0%
2008
131
+19.8%
3.1
11
+19.7%
2009
107
-17.9%
4.5
-20.1%
2010
113
+4.8%
4.1
+3.3%
10 February 2011
122
Figure 16: Barclays US Treasury Bill Index

Year
Treasury Bill Index

December
Treasury Bill Index

1925
100
100
1926
103
+3.2%
104
+4.4%
1927
106
+3.1%
110
+5.5%
1928
110
+3.8%
116
+5.0%
1929
116
+4.7%
120
+4.1%
1930
118
+2.3%
132
+9.3%
1931
120
+1.0%
147
+11.4%
1932
121
+0.8%
165
+12.3%
1933
121
+0.3%
164
-0.5%
1934
121
+0.2%
162
-1.3%
1935
121
+0.2%
157
-2.7%
1936
122
+0.2%
155
-1.3%
1937
122
+0.3%
152
-2.5%
1938
122
+0.0%
156
+2.9%
1939
122
+0.0%
156
+0.0%
1940
122
-0.1%
155
-0.8%
1941
122
+0.0%
141
-9.0%
1942
122
+0.3%
130
-8.0%
1943
123
+0.3%
126
-2.5%
1944
123
+0.3%
124
-1.9%
1945
124
+0.3%
121
-1.9%
1946
124
+0.4%
103
-15.1%
1947
125
+0.5%
95
-7.7%
1948
126
+1.0%
93
-2.0%
1949
127
+1.1%
96
+3.2%
1950
129
+1.2%
92
-4.5%
1951
131
+1.5%
88
-4.3%
1952
133
+1.6%
89
+0.9%
1953
135
+1.8%
90
+1.0%
1954
136
+0.9%
91
+1.6%
1955
138
+1.6%
92
+1.2%
1956
142
+2.4%
92
-0.5%
1957
146
+3.1%
92
+0.2%
1958
148
+1.4%
92
-0.3%
1959
152
+2.8%
93
+1.1%
1960
156
+2.6%
94
+1.2%
1961
160
+2.2%
95
+1.5%
1962
164
+2.7%
97
+1.4%
1963
169
+3.2%
98
+1.5%
1964
175
+3.5%
101
+2.5%
1965
182
+4.0%
103
+2.0%
1966
191
+4.7%
104
+1.2%
1967
199
+4.1%
105
+1.1%
1968
209
+9.7%
105
+0.5%
1969
223
+6.6%
106
+0.4%
10 February 2011
123
Year
Treasury Bill Index

December
Treasury Bill Index

1970
237
+6.4%
107
+0.8%
1971
247
+4.3%
108
+1.0%
1972
257
+3.9%
108
+0.5%
1973
275
+7.1%
107
-1.5%
1974
297
+8.1%
103
-3.8%
1975
315
+5.8%
102
-1.0%
1976
331
+5.2%
102
+0.3%
1977
348
+5.2%
100
-1.5%
1978
373
+7.3%
99
-1.6%
1979
413
+10.7%
96
-2.3%
1980
461
+11.5%
96
-0.9%
1981
529
+14.9%
101
+5.4%
1982
586
+10.7%
107
+6.6%
1983
638
+8.8%
113
+4.9%
1984
701
+10.0%
119
+5.8%
1985
755
+7.7%
124
+3.7%
1986
801
+6.1%
130
+4.9%
1987
844
+5.4%
131
+0.9%
1988
897
+6.3%
133
+1.8%
1989
971
+8.2%
138
+3.4%
1990
1046
+7.7%
140
+1.5%
1991
1103
+5.5%
143
+2.4%
1992
1141
+3.4%
144
+0.5%
1993
1174
+2.9%
144
+0.1%
1994
1219
+3.9%
146
+1.2%
1995
1287
+5.5%
150
+2.9%
1996
1353
+5.1%
153
+1.8%
1997
1422
+5.1%
158
+3.3%
1998
1490
+4.8%
163
+3.1%
1999
1558
+4.6%
166
+1.8%
2000
1647
+5.8%
169
+2.3%
2001
1710
+3.8%
173
+2.2%
2002
1738
+1.6%
172
-0.7%
2003
1755
+1.0%
170
-0.8%
2004
1776
+1.2%
167
-2.0%
2005
1829
+3.0%
166
-0.4%
2006
1916
+4.8%
170
+2.2%
2007
2006
+4.7%
171
+0.6%
2008
2036
+1.5%
173
+1.4%
2009
2038
+0.1%
169
-2.6%
2010
2040
+0.1%
167
-1.4%
10 February 2011
124
CHAPTER 9
Total investment returns

+44 (0) 20 7773 2234
barcap.com
Our final chapter presents a series of tables showing the performance of equity and fixedinterest investments over any period of years since December 1899.
The first section reviews the performance of each asset class taking inflation into account.
The second section reviews the performance over the past 50 years since December 1960.
On each page we provide two tables illustrating the same information in alternative forms.
The first table shows the average annual real rate of return; the second shows the real value
of a portfolio at the end of each year, which includes reinvested income. This section
provides data on equities and gilts, with dividend income reinvested gross. Finally, we
provide figures for Treasury bills and building society shares.
The final pullout section provides the annual real rate of return on both UK and US equities
and bonds with reinvestment of income for each year since 1899 for the UK, and 1925 for
the US). There is also a table showing the real capital value of equities for the UK. Source for
all data in this chapter are the Barclays indices as outlined in Chapter 8.
1960-2010
UK: 1899-2010
Equities income gross
Gilts income gross
Treasury Bills income gross
Building Society Shares income gross
Index-linked gilts
Corporate bonds
UK and US real bond returns income gross
UK and US real equities returns income gross
UK Equities real capital value
US: 1925-2010
10 February 2011
125
REAL RETURN ON EQUITIES - GROSS INCOME RE-INVESTED

AVERAGE ANNUAL REAL RATE OF RETURN
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
(2.5)
(2.4) (2.2)
3.9 7.3 17.7
0.3 1.3 3.0 (9.8)
1.5 2.6 4.2 (1.9) 6.6
(0.0) 0.5 1.2 (3.8) (0.7) (7.4)
3.9 5.0 6.6 3.9 9.0 10.2 31.1
7.8 9.4 11.5 10.3 16.0 19.3 35.4 39.8
4.9 5.9 7.1 5.4 8.8 9.3 15.5
8.5 (15.9)
3.3 3.9 4.7 3.0 5.3 5.0 8.4
1.7 (13.2) (10.5)
5.8 6.6 7.7 6.5 9.0 9.4 13.2
9.1
0.4
9.7 34.4
6.0 6.8 7.7 6.7 8.9 9.2 12.3
8.9
2.3
9.1 20.5
8.1
2.1 2.4 2.9 1.5 2.8 2.4 3.9 (0.1) (6.6) (4.1) (1.9) (16.2) (35.0)
(4.2) (4.4) (4.5) (6.3) (6.0) (7.3) (7.3) (11.8) (18.3) (18.7) (20.7) (33.5) (47.8) (58.1)
0.6 0.8 1.0 (0.2) 0.7 0.1 1.0 (2.3) (7.2) (5.6) (4.6) (12.4) (18.4) (8.6) 99.6
(0.2) (0.0) 0.1 (1.1) (0.4) (1.0) (0.3) (3.3) (7.7) (6.4) (5.7) (12.2) (16.6) (9.4) 33.2 (11.1)
1.5 1.7 2.0 1.0 1.8 1.5 2.3 (0.2) (3.9) (2.3) (1.0) (5.9) (8.5) (0.4) 33.0
8.5 32.5
1.4 1.6 1.9 0.9 1.7 1.4 2.1 (0.2) (3.5) (2.0) (0.9) (5.1) (7.1) (0.3) 23.9
5.7 15.2 0.2
1.1 1.3 1.5 0.5 1.3 0.9 1.6 (0.6) (3.6) (2.3) (1.3) (5.1) (6.8) (1.1) 17.5
2.9 8.1 (2.4) (4.9)
1.8 2.0 2.3 1.4 2.2 1.9 2.6
0.7 (2.0) (0.7)
0.4 (2.8) (4.1)
1.4 17.4
5.6 10.3 3.7 5.5 17.1
1.8 2.0 2.2 1.4 2.1 1.9 2.5
0.7 (1.8) (0.5)
0.5 (2.4) (3.5)
1.4 15.0
4.9 8.4 3.1 4.1 8.9 1.3
2.6 2.9 3.1 2.4 3.2 3.0 3.6
2.0 (0.2)
1.1
2.1 (0.4) (1.2)
3.5 15.8
7.2 10.6 6.6 8.3 13.1 11.1 21.9
3.4 3.7 4.0 3.3 4.1 3.9 4.6
3.2
1.1
2.5
3.5
1.3
0.7
5.2 16.5
9.0 12.2 9.1 11.0 15.3 14.7 22.1 22.3
4.3 4.6 4.9 4.3 5.1 5.0 5.7
4.4
2.5
3.9
5.0
3.0
2.6
6.9 17.4 10.7 13.8 11.3 13.3 17.4 17.4 23.3 24.0 25.8
4.6 4.9 5.3 4.7 5.5 5.4 6.1
4.9
3.1
4.5
5.5
3.7
3.4
7.5 17.1 11.0 13.8 11.6 13.4 16.7 16.7 20.8 20.5 19.6 13.7
5.3 5.6 5.9 5.4 6.2 6.2 6.9
5.8
4.1
5.4
6.5
4.9
4.7
8.6 17.5 12.0 14.6 12.8 14.5 17.6 17.7 21.2 21.0 20.6 18.1 22.7
5.2 5.6 5.9 5.4 6.1 6.1 6.8
5.7
4.2
5.4
6.4
4.9
4.7
8.3 16.5 11.4 13.7 12.0 13.4 15.9 15.7 18.3 17.6 16.5 13.5 13.4 4.8
5.2 5.5 5.8 5.4 6.1 6.0 6.7
5.7
4.2
5.4
6.3
4.9
4.7
8.0 15.6 10.9 12.9 11.3 12.4 14.6 14.2 16.2 15.3 13.9 11.2 10.3 4.6 4.4
5.9 6.2 6.5 6.1 6.8 6.8 7.5
6.5
5.1
6.3
7.3
5.9
5.8
9.1 16.3 11.9 13.9 12.4 13.6 15.6 15.5 17.4 16.7 15.8 13.9 14.0 11.2 14.6 25.8
5.0 5.3 5.5 5.1 5.7 5.7 6.3
5.3
4.0
5.0
5.9
4.6
4.4
7.3 13.8
9.6 11.3 9.8 10.6 12.2 11.7 12.9 11.8 10.4 8.0 6.9 3.3 2.8 2.0 (17.4)
5.3 5.6 5.9 5.5 6.1 6.1 6.7
5.7
4.5
5.5
6.3
5.1
4.9
7.8 13.9 10.0 11.6 10.2 11.0 12.4 12.0 13.2 12.2 11.0 9.1 8.3 5.6 5.9 6.4 (2.2)
5.7 5.9 6.2 5.9 6.5 6.5 7.0
6.2
5.0
6.0
6.8
5.6
5.5
8.2 14.1 10.4 11.9 10.6 11.4 12.8 12.4 13.5 12.7 11.7 10.0 9.5 7.4 8.0 8.9
3.7
6.2 6.5 6.8 6.4 7.1 7.1 7.6
6.8
5.7
6.7
7.5
6.4
6.4
9.0 14.6 11.2 12.6 11.5 12.3 13.6 13.4 14.4 13.8 12.9 11.6 11.3 9.8 10.7 11.9
8.7
5.7 6.0 6.3 5.9 6.5 6.5 7.0
6.2
5.1
6.0
6.8
5.7
5.6
8.1 13.3 10.0 11.3 10.2 10.8 12.0 11.6 12.5 11.7 10.8 9.4 8.9 7.3 7.7 8.2
5.0
6.1 6.4 6.6 6.3 6.9 6.9 7.4
6.7
5.6
6.5
7.3
6.3
6.2
8.6 13.6 10.5 11.7 10.7 11.3 12.4 12.1 12.9 12.3 11.5 10.2 9.9 8.6 9.1 9.7
7.3
6.3 6.6 6.8 6.5 7.1 7.1 7.6
6.9
5.9
6.8
7.5
6.5
6.5
8.8 13.6 10.6 11.8 10.8 11.4 12.5 12.2 12.9 12.3 11.6 10.5 10.2 9.0 9.5 10.1
8.1
6.6 6.9 7.2 6.9 7.4 7.4 8.0
7.3
6.3
7.2
7.9
7.0
6.9
9.2 13.8 11.0 12.1 11.2 11.8 12.8 12.6 13.3 12.8 12.1 11.1 10.9 9.9 10.4 11.1
9.4
6.7 7.0 7.3 7.0 7.5 7.5 8.0
7.4
6.4
7.3
8.0
7.1
7.1
9.2 13.7 10.9 12.1 11.2 11.8 12.7 12.5 13.2 12.6 12.0 11.1 10.9 10.0 10.5 11.1
9.5
7.1 7.4 7.6 7.4 7.9 7.9 8.4
7.8
6.9
7.7
8.4
7.6
7.6
9.7 14.0 11.4 12.5 11.6 12.2 13.1 12.9 13.6 13.2 12.6 11.8 11.6 10.8 11.3 12.0 10.7
6.7 6.9 7.2 6.9 7.4 7.4 7.9
7.3
6.4
7.2
7.8
7.0
7.0
9.0 13.0 10.5 11.5 10.7 11.2 12.0 11.8 12.3 11.8 11.2 10.4 10.2 9.3 9.7 10.1
8.8
6.1 6.3 6.6 6.3 6.8 6.8 7.2
6.6
5.7
6.5
7.0
6.2
6.2
8.1 11.9
9.4 10.4 9.5 9.9 10.7 10.4 10.9 10.3 9.7 8.8 8.5 7.6 7.8 8.1
6.7
5.3 5.5 5.7 5.4 5.8 5.8 6.2
5.5
4.7
5.3
5.9
5.1
5.0
6.7 10.3
8.0 8.8 7.9 8.2 8.8 8.5 8.8 8.2 7.5 6.6 6.2 5.2 5.3 5.3
3.9
5.5 5.7 5.9 5.6 6.1 6.0 6.4
5.8
5.0
5.7
6.2
5.4
5.3
7.0 10.6
8.3 9.1 8.2 8.6 9.2 8.8 9.2 8.6 8.0 7.1 6.8 5.9 6.0 6.1
4.8
5.6 5.8 6.0 5.7 6.1 6.1 6.5
5.9
5.1
5.8
6.3
5.5
5.4
7.1 10.5
8.3 9.0 8.3 8.6 9.2 8.8 9.2 8.6 8.0 7.2 6.9 6.0 6.1 6.2
5.0
5.9 6.1 6.3 6.0 6.4 6.4 6.8
6.2
5.4
6.1
6.6
5.9
5.8
7.5 10.8
8.6 9.4 8.6 8.9 9.5 9.2 9.6 9.1 8.5 7.7 7.4 6.7 6.8 6.9
5.9
6.0 6.2 6.4 6.1 6.5 6.5 6.9
6.4
5.6
6.2
6.8
6.1
6.0
7.6 10.8
8.7 9.4 8.7 9.0 9.6 9.3 9.6 9.2 8.6 7.9 7.6 6.9 7.0 7.2
6.2
5.9 6.1 6.3 6.0 6.4 6.4 6.8
6.2
5.5
6.1
6.6
5.9
5.8
7.4 10.5
8.5 9.2 8.5 8.7 9.3 9.0 9.3 8.8 8.3 7.6 7.3 6.6 6.7 6.9
5.9
5.0 5.1 5.3 5.0 5.4 5.4 5.7
5.1
4.4
5.0
5.4
4.7
4.6
6.1 9.0
7.0 7.6 6.9 7.1 7.6 7.3 7.5 7.0 6.4 5.7 5.3 4.6 4.6 4.6
3.6
5.3 5.5 5.7 5.4 5.8 5.8 6.1
5.6
4.9
5.4
5.9
5.2
5.1
6.6 9.4
7.5 8.1 7.5 7.7 8.1 7.9 8.1 7.6 7.1 6.4 6.1 5.4 5.5 5.5
4.6
5.4 5.6 5.8 5.5 5.9 5.9 6.2
5.7
5.0
5.5
6.0
5.3
5.2
6.6 9.4
7.6 8.2 7.5 7.7 8.2 7.9 8.1 7.7 7.2 6.5 6.2 5.6 5.6 5.7
4.8
The dates along the top (and bottom) are those on which
each portfolio starts. Those down the side are the dates to
which the annual rate of return is calculated. Reading the top
figure in each column diagonally down the table gives the
real rate of return in each year since 1960. The table can be
used to see the real rate of return over any period; thus a
purchase made at the end of 1960 would have lost 2.5%
(allowing for reinvestment of income) in one year but over
the first three years (up to the end of 1963) would have given
an average annual real return of 3.9%. Each figure on the
bottom line of the table shows the real growth up to
December 2010 from the year shown below the figure.
15.7
16.2
19.1
11.5
13.0
13.0
13.9
13.5
14.4
11.8
9.2
5.9
6.7
6.9
7.6
7.9
7.4
4.9
5.9
6.0
16.8
20.9
10.1
12.3
12.5
13.6
13.2
14.2
11.4
8.6
5.1
6.0
6.2
7.1
7.4
6.9
4.3
5.4
5.6
25.1
7.0
10.9
11.4
13.0
12.6
13.8
10.7
7.7
3.9
5.1
5.4
6.4
6.7
6.3
3.5
4.7
5.0
(8.6)
4.4
7.2
10.1
10.2
12.0
8.8
5.7
1.8
3.2
3.7
4.9
5.4
5.1
2.2
3.6
3.9
19.2
16.1
17.1
15.5
16.7
12.0
7.9
3.2
4.6
5.0
6.2
6.7
6.2
3.1
4.4
4.7
13.1
16.1
14.3
16.1
10.7
6.2
1.1
3.0
3.6
5.0
5.6
5.2
1.9
3.5
3.8
19.3
14.9
17.1
10.1
4.8
(0.8)
1.6
2.5
4.2
4.9
4.5
1.0
2.8
3.2
10.6
16.0
7.2
1.5
(4.3)
(1.1)
0.3
2.4
3.4
3.1
(0.5)
1.5
2.0
21.7
5.5
(1.4)
(7.8)
(3.3)
(1.4)
1.3
2.5
2.3
(1.5)
0.7
1.4
(8.6)
(11.2)
(15.9)
(8.7)
(5.4)
(1.8)
0.0
0.2
(3.8)
(1.2)
(0.3)
(13.8)
(19.3)
(8.7)
(4.6)
(0.3)
1.5
1.5
(3.2)
(0.3)
0.6
(24.5)
(6.1)
(1.4)
3.4
4.9
4.3
(1.6)
1.5
2.3
16.9
12.8 8.8
14.8 13.7 18.9
13.9 13.0 15.1 11.4
11.2 9.9 10.2 6.1
1.0
2.9 0.3 (1.8) (7.8) (16.2) (30.4)
5.9 4.1 3.3 (0.3) (4.0) (6.4) 25.9
6.3 4.8 4.2 1.5 (0.9) (1.5) 17.1
8.9
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
126

REAL RETURN ON EQUITIES - GROSS INCOME RE-INVESTED
REAL VALUE OF 100 INVESTED
INVESTMENT TO END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
97
95
112
101
108
100
131
183
154
138
185
200
130
55
109
97
128
128
122
143
145
177
216
272
309
380
398
415
523
432
500
584
730
668
796
900
1073
1187
1445
1321
1138
859
1005
1092
1299
1448
1463
1018
1282
1397
98
115
104
111
102
134
188
158
141
190
205
134
56
112
99
132
132
125
147
149
181
222
279
317
390
408
426
536
443
513
599
749
685
817
923
1101
1218
1482
1355
1168
882
1031
1121
1333
1486
1501
1045
1316
1433
118
106
113
105
137
192
162
145
194
210
137
57
114
102
135
135
128
150
152
186
227
286
325
398
417
436
549
453
524
613
766
701
835
944
1126
1246
1516
1386
1195
902
1054
1147
1364
1520
1536
1068
1346
1466
90
96
89
117
163
137
123
165
179
116
49
97
86
114
115
109
128
129
158
193
243
276
339
355
370
466
385
446
521
651
596
710
803
957
1059
1289
1178
1016
766
896
974
1159
1292
1305
908
1144
1246
107
99
129
181
152
136
183
198
129
54
108
96
127
127
121
141
143
175
214
269
306
375
393
411
517
427
494
577
722
660
787
889
1061
1174
1428
1305
1125
849
993
1080
1284
1432
1446
1006
1267
1381
93
121
170
143
128
172
186
121
51
101
90
119
119
113
133
134
164
200
252
287
352
369
385
485
400
463
541
677
619
738
834
995
1101
1340
1224
1056
797
931
1013
1205
1343
1356
944
1189
1295
131
183
154
138
185
201
130
55
109
97
128
129
122
143
145
177
217
272
310
380
398
416
523
433
500
584
731
669
797
901
1075
1189
1447
1323
1140
861
1006
1094
1301
1450
1465
1019
1284
1399
140
118
105
141
153
99
42
83
74
98
98
93
109
111
135
165
208
236
290
304
317
399
330
382
446
558
510
608
687
820
907
1104
1009
870
656
767
835
993
1106
1118
778
979
1067
84
75
101
109
71
30
59
53
70
70
67
78
79
97
118
149
169
207
217
227
286
236
273
319
399
365
435
492
586
649
789
722
622
470
549
597
710
791
799
556
700
763
89
120
130
85
35
71
63
83
83
79
93
94
115
140
177
201
246
258
270
339
280
324
379
474
434
517
584
697
771
938
858
739
558
652
709
844
940
950
661
832
907
134
145
94
40
79
70
93
93
89
104
105
128
157
197
224
275
289
301
379
313
363
423
530
485
577
653
779
862
1048
958
826
624
729
793
943
1051
1062
739
930
1014
108
70
29
59
52
69
69
66
77
78
95
117
147
167
205
215
224
282
233
270
315
394
361
430
486
579
641
780
713
615
464
542
590
702
782
790
550
692
754
65
27
54
48
64
64
61
71
72
88
108
136
154
190
199
207
261
216
250
291
365
333
397
449
536
593
722
660
569
429
502
546
649
723
731
508
640
698
42
84
74
98
99
94
110
111
136
166
209
238
292
305
319
401
332
384
448
561
513
611
691
824
912
1110
1014
874
660
771
839
998
1112
1124
782
985
1073
200
177
235
236
224
262
266
324
396
499
567
696
729
762
958
792
916
1070
1339
1224
1459
1650
1968
2177
2649
2422
2088
1576
1842
2003
2383
2656
2683
1867
2351
2561
89
118
118
112
132
133
162
199
250
284
349
365
382
480
397
459
536
671
613
731
827
986
1091
1327
1213
1046
790
923
1004
1194
1331
1344
935
1178
1283
which the change in real value is calculated. Reading the top
figure in each column diagonally down the table gives the
growth in each year since 1960. The table can be used to see
the real growth over any period; thus an investment of 100
made at the end of 1960 would have fallen to 97 (allowing
for reinvestment of income and the effect of inflation) in one
year but after three years (up to the end of 1963) would have
reached 112 in real terms. Each figure on the bottom line of
the table shows the real growth up to December 2010 from
the year shown below the figure.
133
133
126
148
150
183
223
281
320
392
411
429
540
446
516
603
755
690
822
930
1109
1227
1493
1365
1177
888
1038
1129
1343
1497
1512
1052
1325
1444
100
95
112
113
138
169
212
241
296
310
324
408
337
390
455
569
521
621
702
837
926
1127
1030
888
670
783
852
1013
1129
1141
794
1000
1089
95
111
113
138
168
212
241
295
310
323
407
336
389
454
568
520
619
700
835
924
1124
1028
886
669
782
850
1011
1127
1139
792
998
1087
117
119 101
145 124 122
177 151 149
223 190 188
253 216 213
311 265 262
325 278 274
340 290 286
428 365 360
353 302 298
409 349 344
478 408 402
597 510 503
546 467 460
651 556 549
736 629 620
878 750 740
972 830 819
1182 1009 996
1081 923 910
932 795 785
703 600 592
822 702 693
894 763 753
1063 908 896
1185 1012 998
1197 1022 1009
833 711 702
1049 896 884
1143 976 963
122
154
175
215
225
235
296
244
283
330
413
378
450
509
607
672
817
747
644
486
568
618
735
819
827
576
725
790
126
143
176
184
192
242
200
231
270
338
309
368
416
496
549
668
611
527
397
465
505
601
670
677
471
593
646
114
140
146
153
192
159
184
215
268
245
292
331
394
436
531
485
418
316
369
402
478
532
538
374
471
513
123
129
134
169
140
162
189
236
216
257
291
347
384
467
427
368
278
325
353
420
468
473
329
414
452
105
109
138
114
132
154
192
176
210
237
283
313
381
348
300
226
265
288
342
382
385
268
338
368
104
131
109
126
147
184
168
200
226
270
299
363
332
286
216
253
275
327
364
368
256
322
351
126
104
120
141
176
161
192
217
258
286
348
318
274
207
242
263
313
349
352
245
309
336
83
96
112
140
128
152
172
205
227
276
253
218
164
192
209
249
277
280
195
245
267
116
135
169
155
184
208
248
275
334
306
264
199
233
253
301
335
339
236
297
323
117
146
134
159
180
215
238
289
264
228
172
201
219
260
290
293
204
257
280
125
114
136
154
184
203
248
226
195
147
172
187
223
248
251
174
220
239
91
109
123
147
163
198
181
156
118
138
150
178
198
200
139
176
191
119
135
161
178
216
198
171
129
150
164
195
217
219
152
192
209
113
135
149
182
166
143
108
126
137
163
182
184
128
161
176
119
132
161
147
127
95
112
121
144
161
163
113
142
155
111
135
123
106
80
94
102
121
135
136
95
119
130
122
111
96
72
85
92
109
122
123
86
108
118
91
79
59
70
76
90
100
101
70
89
97
86
65
76
83
98
110
111
77
97
106
75
88
96
114
127
129
89
113
123
117
127
151
169
170
118
149
163
109
129
144
146
101
128
139
119
133
134
93
117
128
111
113
78
99
107
101
70
89
96
70
88
95
126
137
109
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
127
REAL RETURN ON GILTS - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
(11.9)
3.5
2.9
0.4
0.3
0.3
0.3
(0.8)
(1.1)
(1.4)
0.1
(0.9)
(2.3)
(4.4)
(3.6)
(3.4)
(1.8)
(2.2)
(2.7)
(2.3)
(2.7)
(0.9)
(0.5)
(0.4)
(0.2)
0.1
0.5
0.6
0.5
0.4
0.8
1.2
1.9
1.4
1.8
1.9
2.2
2.7
2.5
2.6
2.5
2.6
2.5
2.5
2.6
2.5
2.4
2.6
2.5
2.5
21.5
11.2
4.9
3.6
3.0
2.5
0.9
0.3
(0.2)
1.4
0.2
(1.4)
(3.8)
(2.9)
(2.8)
(1.1)
(1.6)
(2.2)
(1.8)
(2.2)
(0.4)
0.1
0.2
0.4
0.6
1.0
1.1
1.0
0.8
1.2
1.7
2.4
1.8
2.2
2.3
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.8
3.0
2.8
2.9
1.8
(2.6)
(1.8)
(1.2)
(0.9)
(2.1)
(2.4)
(2.6)
(0.6)
(1.7)
(3.3)
(5.7)
(4.6)
(4.4)
(2.4)
(2.9)
(3.4)
(2.9)
(3.3)
(1.4)
(0.8)
(0.7)
(0.5)
(0.2)
0.3
0.4
0.3
0.2
0.6
1.1
1.8
1.3
1.7
1.8
2.1
2.6
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
(6.7)
(3.5)
(2.2)
(1.6)
(2.9)
(3.1)
(3.2)
(0.9)
(2.1)
(3.7)
(6.4)
(5.1)
(4.8)
(2.7)
(3.2)
(3.7)
(3.2)
(3.6)
(1.5)
(1.0)
(0.8)
(0.6)
(0.3)
0.2
0.3
0.2
0.1
0.6
1.0
1.8
1.3
1.7
1.8
2.1
2.7
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
(0.1)
0.2
0.2
(1.9)
(2.4)
(2.6)
(0.1)
(1.5)
(3.4)
(6.3)
(5.0)
(4.7)
(2.4)
(2.9)
(3.5)
(3.0)
(3.4)
(1.2)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.6
0.5
0.4
0.8
1.3
2.1
1.5
2.0
2.1
2.4
2.9
2.7
2.8
2.7
2.8
2.7
2.8
2.8
2.7
2.6
2.8
2.7
2.7
0.5
0.3
(2.5)
(2.9)
(3.1)
(0.1)
(1.7)
(3.8)
(7.0)
(5.4)
(5.1)
(2.6)
(3.1)
(3.7)
(3.2)
(3.6)
(1.3)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.7
0.6
0.4
0.9
1.4
2.2
1.6
2.0
2.1
2.5
3.0
2.8
2.9
2.8
2.9
2.8
2.8
2.9
2.7
2.7
2.9
2.7
2.8
0.1
(4.0)
(4.0)
(4.0)
(0.2)
(2.0)
(4.4)
(7.9)
(6.1)
(5.6)
(2.9)
(3.4)
(4.1)
(3.4)
(3.8)
(1.4)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.4
2.3
1.6
2.1
2.2
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.7
2.9
2.8
2.8
(7.8)
(6.1)
(5.4)
(0.3)
(2.4)
(5.1)
(9.0)
(6.8)
(6.2)
(3.2)
(3.8)
(4.4)
(3.7)
(4.1)
(1.5)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.5
2.3
1.7
2.1
2.2
2.7
3.2
2.9
3.0
3.0
3.1
3.0
3.0
3.0
2.9
2.8
3.0
2.9
2.9
(4.2)
(4.1) (4.0)
2.4
5.9 16.8
(1.0)
0.0
2.1 (10.7)
(4.6) (4.7) (4.9) (14.2) (17.6)
(9.1) (10.1) (11.6) (19.4) (23.4) (28.8)
(6.7) (7.1) (7.7) (13.0) (13.7) (11.7) 9.5
(6.0) (6.3) (6.6) (10.7) (10.7) (8.3) 4.1 (1.1)
(2.6) (2.4) (2.2) (5.1) (3.9) (0.1) 11.8 13.0 29.1
(3.3) (3.2) (3.1) (5.7) (4.8) (2.1) 6.1 5.0 8.1 (9.4)
(4.1) (4.1) (4.1) (6.4) (5.8) (3.6) 2.4 0.7 1.3 (10.3) (11.2)
(3.4) (3.3) (3.2) (5.2) (4.5) (2.5) 2.8 1.5 2.2 (5.5) (3.4) 5.0
(3.8) (3.8) (3.8) (5.6) (5.0) (3.3) 1.0 (0.4) (0.2) (6.4) (5.4) (2.3) (9.2)
(1.0) (0.8) (0.5) (1.9) (1.0)
1.0 5.5 5.0 6.0
1.9
5.0 11.1 14.2 43.6
(0.3) (0.0)
0.3 (1.0) (0.1)
1.9 6.0 5.6 6.6
3.2
6.0 10.8 12.8 25.7 10.0
(0.2)
0.1
0.4 (0.8)
0.1
1.9 5.6 5.2 6.0
3.1
5.3 9.0 10.0 17.3 6.0
0.1
0.4
0.7 (0.4)
0.5
2.2 5.6 5.2 5.9
3.3
5.3 8.3 9.0 14.1 5.7
0.5
0.8
1.1
0.1
0.9
2.5 5.7 5.3 6.0
3.7
5.5 8.1 8.7 12.6 6.0
1.1
1.4
1.7
0.8
1.6
3.2 6.2 5.9 6.6
4.5
6.2 8.6 9.1 12.5 7.2
1.1
1.4
1.7
0.9
1.7
3.1 5.9 5.6 6.2
4.3
5.8 7.9 8.3 11.0 6.4
1.0
1.3
1.6
0.8
1.5
2.8 5.4 5.1 5.6
3.8
5.1 6.9 7.1 9.4 5.2
0.8
1.0
1.3
0.6
1.2
2.5 4.8 4.5 4.9
3.3
4.4 5.9 6.0 7.9 4.1
1.3
1.6
1.9
1.2
1.8
3.1 5.3 5.1 5.5
4.0
5.1 6.6 6.7 8.4 5.1
1.9
2.2
2.5
1.8
2.5
3.7 5.9 5.6 6.1
4.7
5.8 7.2 7.4 9.1 6.1
2.8
3.1
3.4
2.8
3.5
4.7 6.8 6.7 7.2
5.9
7.1 8.5 8.8 10.4 7.8
2.1
2.3
2.6
2.0
2.7
3.7 5.7 5.5 5.9
4.7
5.6 6.8 7.0 8.3 5.8
2.5
2.8
3.1
2.6
3.2
4.2 6.1 6.0 6.4
5.2
6.2 7.4 7.5 8.8 6.5
2.6
2.9
3.2
2.7
3.3
4.3 6.1 5.9 6.3
5.2
6.1 7.2 7.4 8.6 6.4
3.0
3.3
3.6
3.1
3.7
4.7 6.5 6.3 6.7
5.7
6.6 7.7 7.8 9.0 7.0
3.6
3.9
4.2
3.7
4.3
5.3 7.1 7.0 7.4
6.4
7.3 8.3 8.5 9.7 7.8
3.3
3.6
3.8
3.4
4.0
4.9 6.6 6.4 6.8
5.9
6.6 7.6 7.8 8.8 7.0
3.4
3.7
3.9
3.5
4.1
5.0 6.5 6.4 6.7
5.9
6.6 7.6 7.7 8.6 7.0
3.3
3.6
3.8
3.4
3.9
4.8 6.3 6.2 6.5
5.6
6.4 7.2 7.3 8.2 6.6
3.4
3.7
3.9
3.5
4.0
4.9 6.3 6.2 6.5
5.7
6.4 7.2 7.3 8.2 6.6
3.3
3.5
3.7
3.4
3.8
4.7 6.1 5.9 6.2
5.4
6.1 6.8 6.9 7.7 6.3
3.3
3.5
3.7
3.4
3.8
4.6 6.0 5.9 6.1
5.3
6.0 6.7 6.8 7.5 6.1
3.4
3.6
3.8
3.4
3.9
4.7 6.0 5.9 6.1
5.4
6.0 6.7 6.7 7.5 6.1
3.1
3.4
3.6
3.2
3.7
4.4 5.6 5.5 5.7
5.0
5.6 6.3 6.3 7.0 5.7
3.1
3.3
3.5
3.2
3.6
4.3 5.5 5.4 5.6
4.9
5.4 6.1 6.1 6.7 5.5
3.3
3.5
3.7
3.4
3.8
4.5 5.7 5.6 5.8
5.1
5.6 6.3 6.3 6.9 5.7
3.1
3.3
3.5
3.2
3.6
4.3 5.4 5.3 5.5
4.8
5.3 5.9 6.0 6.5 5.4
3.2
3.4
3.6
3.2
3.6
4.3 5.4 5.3 5.5
4.8
5.3 5.9 5.9 6.5 5.3
which the annual rate of return is calculated. Reading the
top figure in each column diagonally down the table gives
the real rate of return in each year since 1960. The table can
be used to see the real rate of return over any period; thus a
purchase made at the end of 1960 would have lost 11.9%
(allowing for reinvestment of income) in one year but over
the first three years (up to the end of 1963) would have
given an average annual real return of 2.9%. Each figure on
the bottom line of the table shows the real growth up to
2.1
3.6
4.7
6.5
5.7
4.4
3.3
4.5
5.7
7.6
5.4
6.2
6.1
6.8
7.7
6.8
6.8
6.5
6.5
6.1
5.9
6.0
5.5
5.3
5.5
5.2
5.2
5.0
6.0
8.0
6.6
4.9
3.4
4.9
6.1
8.2
5.8
6.6
6.5
7.1
8.1
7.2
7.1
6.7
6.7
6.3
6.1
6.1
5.6
5.4
5.7
5.3
5.3
7.0
9.5 12.1
7.1 7.2 2.4
4.8 4.2 0.4 (1.7)
3.1 2.2 (0.9) (2.5) (3.4)
4.8 4.4 2.6 2.6 4.8 13.8
6.3 6.2 5.0 5.7 8.3 14.6 15.4
8.6 8.9 8.3 9.5 12.5 18.4 20.8 26.4
5.9 5.7 4.8 5.2 6.7 9.4 7.9 4.4 (13.8)
6.8 6.7 6.1 6.6 8.1 10.5 9.7 7.9 (0.3) 15.3
6.6 6.6 6.0 6.4 7.6 9.6 8.8 7.2
1.5 10.1 5.1
7.3 7.3 6.9 7.4 8.6 10.4 9.8 8.8
4.7 11.8 10.1 15.3
8.4 8.5 8.1 8.7 10.0 11.7 11.5 10.8
7.9 14.2 13.8 18.4 21.7
7.3 7.4 7.0 7.4 8.3 9.7 9.2 8.4
5.6 10.0 8.7 9.9 7.4 (5.2)
7.2 7.3 6.9 7.3 8.1 9.4 8.9 8.1
5.7 9.3 8.2 9.0 7.0 0.3
6.8 6.8 6.4 6.8 7.5 8.5 8.0 7.2
5.0 8.1 6.9 7.3 5.3 0.4
6.8 6.8 6.5 6.7 7.4 8.4 7.9 7.2
5.2 7.9 6.9 7.2 5.6 1.9
6.3 6.3 6.0 6.2 6.8 7.6 7.1 6.4
4.6 6.8 5.8 5.9 4.4 1.3
6.2 6.2 5.8 6.0 6.6 7.3 6.8 6.1
4.5 6.5 5.6 5.6 4.3 1.7
6.2 6.2 5.8 6.0 6.5 7.2 6.8 6.1
4.6 6.5 5.6 5.7 4.5 2.3
5.7 5.6 5.3 5.4 5.9 6.5 6.0 5.4
3.9 5.5 4.7 4.6 3.5 1.4
5.5 5.4 5.1 5.2 5.6 6.1 5.7 5.1
3.7 5.2 4.4 4.3 3.3 1.4
5.7 5.7 5.4 5.5 5.9 6.5 6.0 5.5
4.2 5.6 4.9 4.9 4.0 2.4
5.3 5.3 5.0 5.1 5.4 5.9 5.5 4.9
3.7 5.0 4.3 4.3 3.4 1.9
5.3 5.2 4.9 5.1 5.4 5.8 5.4 4.9
3.8 5.0 4.3 4.3 3.5 2.1
6.1
3.3
4.4
3.0
3.1
3.6
2.4
2.3
3.3
2.6
2.8
0.6
3.6
2.0
2.4
3.1
1.8
1.7
2.9
2.2
2.4
6.7
2.7 (1.2)
3.0 1.2
3.7 2.8
2.1 0.9
1.9 1.0
3.3 2.7
2.4 1.8
2.6 2.2
3.6
4.8
1.7
1.5
3.5
2.3
2.6
6.0
0.7 (4.4)
0.9 (1.7)
3.5 2.6
2.1 1.1
2.5 1.8
1.2
6.4 11.8
3.0 4.0 (3.3)
3.4 4.1 0.5
4.4
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
128
REAL RETURN ON GILTS - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
88
107
109
102
101
102
102
94
90
87
101
90
74
53
58
57
74
67
59
62
57
81
90
92
96
103
115
118
116
112
128
147
186
161
185
195
224
273
259
274
276
295
291
301
320
306
309
346
335
349
121
124
115
115
116
116
107
102
98
115
102
84
60
66
65
84
76
68
71
64
92
102
104
109
117
131
134
132
127
145
167
211
182
210
221
255
310
294
311
314
334
330
342
363
347
351
393
380
397
102
95
95
95
95
88
84
81
94
84
69
49
54
54
69
63
56
58
53
76
84
86
90
96
108
110
109
105
119
138
174
150
173
182
210
255
242
256
258
275
272
282
299
286
289
323
313
326
93
93
94
94
86
83
79
93
83
68
49
53
53
68
61
55
57
52
75
82
84
88
94
106
108
107
103
117
135
171
147
170
179
206
250
237
252
253
270
267
277
293
281
284
317
307
321
100
100
100
93
89
85
99
89
73
52
57
56
73
66
59
61
56
80
88
90
95
101
113
116
114
110
126
145
183
158
182
191
221
268
254
270
272
290
286
297
315
301
304
340
329
344
101
101
93
89
85
100
89
73
52
57
56
73
66
59
62
56
80
88
90
95
101
114
116
114
111
126
145
184
158
182
192
221
269
255
270
272
290
287
297
315
301
305
341
330
344
100
92
88
85
99
88
73
52
57
56
73
66
58
61
56
80
88
90
94
101
113
116
114
110
125
144
183
157
181
191
220
267
254
269
271
289
285
296
313
300
303
339
328
342
92
88
85
99
88
73
52
57
56
72
66
58
61
56
80
88
90
94
101
113
116
114
110
125
144
182
157
181
191
220
267
253
269
270
289
285
295
313
299
303
339
328
342
96
92
107
96
79
56
62
61
79
71
63
66
60
87
95
97
102
109
123
126
123
119
136
157
198
171
197
207
238
290
275
292
293
313
309
320
340
325
329
367
355
371
96
112
100
83
59
64
64
82
74
66
69
63
90
99
102
107
114
128
131
129
125
142
164
207
178
205
216
249
303
287
305
306
327
323
335
355
339
343
384
371
388
117
104
86
61
67
66
86
77
69
72
66
94
104
106
111
119
133
137
134
130
148
170
215
186
214
225
259
315
299
317
319
341
336
349
370
353
357
400
387
404
89
74
52
57
57
73
66
59
62
56
81
89
91
95
102
114
117
115
111
126
146
184
159
183
193
222
270
256
272
273
292
288
298
316
303
306
342
331
346
82
59
64
63
82
74
66
69
63
90
99
101
107
114
128
131
129
124
142
163
206
178
205
216
248
302
287
304
306
326
322
334
354
339
343
383
371
387
71
78
77
100
90
80
84
76
110
121
123
129
138
155
159
156
151
172
198
251
216
249
262
302
367
348
369
371
396
391
405
430
411
416
465
450
470
110
108
140
127
112
118
107
154
169
173
182
194
218
223
220
212
241
279
352
303
350
368
424
516
489
519
522
557
550
570
604
578
584
653
632
660
which the change in real value is calculated. Reading the
the growth in each year since 1960. The table can be used
to see the real growth over any period; thus an investment
of 100 made at the end of 1960 would have fallen to 88
(allowing for reinvestment of income and the effect of
inflation) in one year but after three years (up to the end of
1963) would have reached 109 in real terms. Each figure
on the bottom line of the table shows the real growth up to
99
128
116
103
108
98
141
155
158
166
177
199
204
200
194
220
254
321
277
319
336
387
471
446
473
476
508
502
520
552
527
534
597
577
603
129
117
104
109
99
142
156
160
168
179
201
206
203
196
223
257
325
280
323
340
391
476
451
479
482
514
508
526
558
534
540
604
584
610
91
80
84
77
110
121
124
130
139
156
160
157
152
173
199
252
217
250
263
303
369
350
371
373
398
393
407
432
413
418
467
452
472
89
93
85
122
134
137
143
153
172
176
173
167
191
220
278
240
276
290
335
407
386
410
412
440
434
450
477
456
462
516
499
521
105
95
137
151
154
162
173
194
199
195
189
215
248
313
270
311
327
377
459
435
461
464
495
489
507
537
514
520
581
562
587
91
130
143
147
154
165
185
189
186
180
204
236
298
257
296
311
359
437
414
439
442
471
466
482
512
489
495
553
535
559
144
158
161
169
181
203
208
205
198
225
260
328
283
326
343
395
481
456
483
487
519
513
531
563
539
545
609
589
615
110
112
118
126
142
145
143
138
157
181
229
197
227
239
275
335
317
337
339
362
357
370
392
375
380
424
411
429
102
107
115
129
132
130
125
142
164
208
179
206
217
250
304
288
306
308
329
325
336
357
341
345
386
373
390
105
112
126
129
127
123
139
161
203
175
202
213
245
298
282
300
302
322
318
329
349
334
338
378
365
382
107
120
123
121
117
133
153
194
167
193
202
233
284
269
285
287
306
303
314
333
318
322
360
348
363
112
115
113
109
124
143
181
156
180
189
218
265
251
267
269
287
283
293
311
297
301
336
325
340
102
101
97
111
128
162
139
160
169
194
237
224
238
239
255
252
261
277
265
268
300
290
303
98
95
108
125
158
136
157
165
190
231
219
232
234
249
246
255
271
259
262
293
283
296
97
110
127
160
138
159
167
193
235
223
236
238
254
251
260
275
263
266
298
288
301
114
131
166
143
165
173
200
243
230
245
246
263
259
269
285
272
276
308
298
311
115
146
126
145
152
176
214
202
215
216
231
228
236
250
239
242
271
262
274
126
109
126
132
152
185
175
186
187
200
197
205
217
207
210
235
227
237
86
99
104
120
146
139
147
148
158
156
162
172
164
166
186
180
187
115
121
140
170
161
171
172
183
181
188
199
190
193
215
208
218
105
121
147
140
148
149
159
157
163
173
165
167
187
181
189
115
140
133
141
142
151
150
155
164
157
159
178
172
180
122
115
122
123
131
130
134
143
136
138
154
149
156
95
101
101
108
107
111
117
112
113
127
123
128
106
107
114
113
117
124
118
120
134
129
135
101
107
106
110
117
111
113
126
122
127
107
105
109
116
111
112
125
121
126
99
102
109
104
105
117
114
119
104
110
105
106
119
115
120
106
101
103
115
111
116
96
97
108
105
109
101
113
109
114
112
108
113
97
101
104
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
129
REAL RETURN ON TREASURY BILLS - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0.7
1.3
1.5
1.0
1.1
1.3
1.6
1.6
1.8
1.6
1.2
0.9
0.7
0.3
(0.6)
(0.7)
(0.8)
(0.8)
(0.9)
(0.8)
(0.7)
(0.4)
(0.2)
0.0
0.3
0.5
0.7
0.8
1.0
1.2
1.3
1.5
1.6
1.6
1.7
1.7
1.7
1.8
1.9
1.9
2.0
2.0
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.7
1.8
1.8
1.1
1.2
1.5
1.8
1.7
1.9
1.6
1.2
0.9
0.7
0.2
(0.7)
(0.8)
(0.9)
(0.9)
(1.0)
(0.9)
(0.8)
(0.4)
(0.2)
0.0
0.2
0.5
0.7
0.8
1.0
1.2
1.4
1.5
1.6
1.6
1.7
1.7
1.8
1.9
1.9
1.9
2.0
2.0
2.0
1.9
2.0
1.9
1.9
2.0
1.9
1.8
1.9
0.8
1.1
1.4
1.8
1.7
1.9
1.6
1.1
0.8
0.6
0.1
(0.8)
(1.0)
(1.1)
(1.1)
(1.2)
(1.0)
(0.9)
(0.5)
(0.3)
(0.1)
0.2
0.5
0.7
0.8
1.0
1.2
1.4
1.5
1.6
1.6
1.7
1.7
1.8
1.9
1.9
1.9
2.0
2.0
2.0
1.9
2.0
1.9
1.9
2.0
1.9
1.8
(0.4)
0.7
1.2
1.8
1.7
1.9
1.6
1.1
0.7
0.5
(0.1)
(1.1)
(1.2)
(1.3)
(1.3)
(1.4)
(1.2)
(1.0)
(0.7)
(0.4)
(0.2)
0.1
0.4
0.6
0.7
1.0
1.1
1.3
1.5
1.6
1.6
1.7
1.7
1.8
1.9
1.9
1.9
2.0
2.0
2.0
2.0
2.0
1.9
1.9
2.0
1.9
1.8
1.7
2.0
2.5
2.2
2.4
1.9
1.3
0.8
0.6
(0.0)
(1.1)
(1.3)
(1.4)
(1.3)
(1.4)
(1.2)
(1.1)
(0.7)
(0.4)
(0.1)
0.1
0.4
0.7
0.8
1.0
1.2
1.4
1.6
1.7
1.7
1.7
1.8
1.8
1.9
2.0
2.0
2.1
2.1
2.0
2.0
2.0
2.0
2.0
2.0
1.9
1.8
2.4
2.9
2.4
2.6
2.0
1.2
0.7
0.4
(0.2)
(1.4)
(1.6)
(1.6)
(1.5)
(1.7)
(1.4)
(1.3)
(0.8)
(0.5)
(0.2)
0.0
0.4
0.6
0.7
1.0
1.2
1.4
1.6
1.7
1.7
1.7
1.8
1.8
1.9
2.0
2.0
2.1
2.1
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.8
3.4
2.4
2.6
1.9
0.9
0.4
0.2
(0.6)
(1.8)
(2.0)
(2.0)
(1.9)
(2.0)
(1.7)
(1.5)
(1.0)
(0.7)
(0.4)
(0.1)
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.6
1.7
1.7
1.8
1.8
1.9
2.0
2.0
2.1
2.1
2.0
2.0
2.0
2.0
2.0
2.0
1.9
1.8
1.4
2.3
1.4
0.4
(0.1)
(0.4)
(1.1)
(2.4)
(2.5)
(2.5)
(2.3)
(2.4)
(2.1)
(1.8)
(1.3)
(0.9)
(0.6)
(0.3)
0.1
0.4
0.5
0.8
1.0
1.3
1.5
1.6
1.6
1.7
1.7
1.8
1.9
1.9
2.0
2.1
2.0
2.0
2.0
2.0
2.0
1.9
2.0
1.9
1.8
3.1
1.3
0.0
(0.5)
(0.7)
(1.5)
(3.0)
(3.0)
(2.9)
(2.7)
(2.7)
(2.4)
(2.1)
(1.5)
(1.1)
(0.7)
(0.4)
0.0
0.3
0.5
0.8
1.0
1.3
1.5
1.6
1.6
1.7
1.7
1.8
1.9
2.0
2.0
2.1
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.9
1.8
(0.4)
(1.5)
(1.7)
(1.6)
(2.4)
(4.0)
(3.9)
(3.7)
(3.3)
(3.3)
(2.9)
(2.5)
(1.8)
(1.4)
(1.0)
(0.6)
(0.1)
0.2
0.4
0.7
0.9
1.2
1.4
1.5
1.5
1.6
1.7
1.7
1.9
1.9
2.0
2.0
2.0
2.0
2.0
2.0
1.9
1.9
2.0
1.9
1.7
(2.6)
(2.3)
(2.0)
(2.9)
(4.7)
(4.4)
(4.1)
(3.7)
(3.6)
(3.1)
(2.7)
(1.9)
(1.5)
(1.0)
(0.6)
(0.1)
0.2
0.4
0.7
1.0
1.2
1.5
1.6
1.6
1.7
1.8
1.8
1.9
2.0
2.0
2.1
2.1
2.1
2.0
2.0
2.0
2.0
2.1
2.0
1.8
(2.1)
(1.7)
(3.0)
(5.2)
(4.8)
(4.4)
(3.8)
(3.7)
(3.1)
(2.7)
(1.9)
(1.4)
(0.9)
(0.4)
0.0
0.4
0.6
0.9
1.2
1.4
1.7
1.8
1.8
1.9
2.0
2.0
2.1
2.2
2.2
2.3
2.2
2.2
2.2
2.2
2.1
2.1
2.2
2.1
1.9
(1.4)
(3.5)
(6.2)
(5.4)
(4.8)
(4.1)
(4.0)
(3.3)
(2.8)
(1.9)
(1.3)
(0.8)
(0.3)
0.2
0.6
0.8
1.1
1.4
1.6
1.9
2.0
2.0
2.1
2.1
2.2
2.3
2.3
2.4
2.4
2.4
2.3
2.3
2.3
2.3
2.2
2.3
2.2
2.0
(5.5)
(8.5)
(6.8)
(5.7)
(4.6)
(4.4)
(3.5)
(2.9)
(1.9)
(1.3)
(0.7)
(0.2)
0.3
0.7
0.9
1.2
1.5
1.8
2.1
2.1
2.2
2.2
2.3
2.3
2.4
2.5
2.5
2.6
2.5
2.5
2.4
2.4
2.4
2.4
2.4
2.3
2.1
(11.3)
(7.4)
(5.7)
(4.4)
(4.2)
(3.2)
(2.5)
(1.4)
(0.8)
(0.3)
0.3
0.8
1.2
1.4
1.7
2.0
2.3
2.5
2.6
2.6
2.6
2.6
2.7
2.8
2.8
2.8
2.9
2.8
2.8
2.7
2.7
2.6
2.6
2.7
2.5
2.3
(3.2)
(2.8)
(2.0)
(2.3)
(1.5)
(1.0)
0.1
0.6
1.1
1.5
2.0
2.3
2.4
2.7
2.9
3.2
3.4
3.4
3.3
3.4
3.4
3.4
3.4
3.4
3.4
3.5
3.4
3.3
3.2
3.2
3.1
3.1
3.1
3.0
2.8
the real rate of return in each year since 1960. The table
can be used to see the real rate of return over any period;
thus a purchase made at the end of 1963 would have lost
0.4% (allowing for reinvestment of income) in one year but
over the first three years (up to the end of 1966) would
have given an average annual real return of 1.2%. Each
figure on the bottom line of the table shows the real
growth up to December 2010 from the year shown below
the figure.
(2.4)
(1.4)
(2.0)
(1.1)
(0.5)
0.6
1.2
1.6
2.1
2.6
2.8
2.9
3.2
3.4
3.6
3.8
3.8
3.7
3.7
3.7
3.7
3.7
3.7
3.7
3.8
3.7
3.6
3.5
3.4
3.3
3.3
3.3
3.2
2.9
(0.3)
(1.8) (3.2)
(0.6) (0.8)
(0.1) (0.0)
1.2 1.6
1.8 2.2
2.2 2.6
2.6 3.1
3.1 3.6
3.4 3.8
3.4 3.8
3.7 4.0
3.8 4.2
4.1 4.4
4.2 4.6
4.2 4.5
4.1 4.4
4.1 4.3
4.0 4.3
4.0 4.2
4.0 4.3
4.0 4.2
4.0 4.2
4.0 4.2
3.9 4.1
3.8 4.0
3.7 3.8
3.7 3.8
3.5 3.7
3.5 3.6
3.5 3.6
3.3 3.5
3.1 3.2
1.8
1.7
3.3
3.6
3.8
4.2
4.6
4.7
4.6
4.8
4.9
5.1
5.2
5.1
4.9
4.8
4.7
4.7
4.7
4.6
4.6
4.6
4.4
4.3
4.1
4.1
3.9
3.9
3.9
3.7
3.4
1.5
4.0
4.2
4.4
4.7
5.0
5.1
5.0
5.1
5.2
5.4
5.5
5.3
5.1
5.0
4.9
4.8
4.8
4.8
4.7
4.7
4.5
4.4
4.2
4.2
4.0
3.9
4.0
3.8
3.5
6.6
5.6
5.3
5.4
5.7
5.7
5.5
5.6
5.6
5.8
5.8
5.7
5.4
5.3
5.2
5.0
5.0
5.0
4.9
4.9
4.7
4.5
4.4
4.3
4.1
4.0
4.0
3.8
3.6
4.6
4.7
5.1
5.5
5.6
5.3
5.4
5.5
5.7
5.8
5.6
5.3
5.2
5.1
4.9
4.9
4.9
4.8
4.8
4.6
4.4
4.3
4.2
4.0
3.9
3.9
3.7
3.4
4.8
5.3
5.9
5.8
5.4
5.6
5.6
5.8
5.9
5.7
5.4
5.2
5.1
5.0
5.0
4.9
4.8
4.8
4.6
4.4
4.2
4.2
4.0
3.9
3.9
3.7
3.4
5.8
6.4
6.2
5.6
5.8
5.8
5.9
6.0
5.8
5.5
5.3
5.1
5.0
5.0
4.9
4.8
4.8
4.6
4.4
4.2
4.1
4.0
3.9
3.9
3.7
3.4
7.0
6.3
5.5
5.7
5.8
6.0
6.1
5.8
5.4
5.2
5.1
4.9
4.9
4.8
4.7
4.7
4.5
4.3
4.1
4.1
3.9
3.8
3.8
3.6
3.3
5.7
4.8
5.3
5.5
5.8
5.9
5.6
5.2
5.0
4.9
4.7
4.7
4.7
4.6
4.6
4.4
4.1
4.0
3.9
3.7
3.6
3.7
3.4
3.1
4.0
5.2
5.4
5.8
6.0
5.6
5.2
4.9
4.8
4.6
4.7
4.6
4.5
4.5
4.3
4.1
3.9
3.8
3.6
3.5
3.6
3.3
3.0
6.4
6.2
6.4
6.5
5.9
5.4
5.1
4.9
4.7
4.7
4.6
4.5
4.5
4.3
4.1
3.9
3.8
3.6
3.5
3.5
3.3
2.9
6.0
6.4
6.5
5.8
5.2
4.9
4.7
4.5
4.5
4.5
4.3
4.4
4.1
3.9
3.7
3.6
3.5
3.4
3.4
3.1
2.8
6.8
6.8
5.8
5.0
4.6
4.5
4.3
4.4
4.3
4.2
4.2
4.0
3.7
3.5
3.5
3.3
3.2
3.3
3.0
2.6
6.7
5.3
4.3
4.1
4.0
3.9
4.0
4.0
3.9
4.0
3.7
3.5
3.3
3.3
3.1
3.0
3.1
2.8
2.4
3.9
3.2
3.2
3.3
3.3
3.6
3.6
3.5
3.7
3.4
3.2
3.0
3.0
2.8
2.7
2.8
2.6
2.2
2.4
2.9
3.2
3.2
3.5
3.5
3.5
3.7
3.4
3.1
2.9
2.9
2.7
2.7
2.8
2.5
2.1
3.4
3.5
3.4
3.8
3.8
3.7
3.8
3.5
3.2
3.0
3.0
2.8
2.7
2.8
2.5
2.1
3.6
3.4
3.9
3.9
3.7
3.9
3.5
3.2
2.9
2.9
2.7
2.6
2.7
2.4
2.0
3.1
4.1
3.9
3.8
4.0
3.5
3.1
2.9
2.8
2.6
2.5
2.7
2.3
1.9
5.0
4.4
4.0
4.2
3.6
3.1
2.8
2.8
2.5
2.5
2.6
2.3
1.8
3.7
3.4
3.9
3.2
2.7
2.5
2.5
2.2
2.2
2.4
2.0
1.5
3.2
4.0
3.0
2.5
2.2
2.3
2.0
2.0
2.2
1.8
1.3
4.8
2.9
2.3
2.0
2.1
1.8
1.8
2.1
1.7
1.1
1.1
1.0
1.0
1.5
1.3
1.3
1.7
1.3
0.7
0.9
1.0
1.6
1.3
1.4
1.9
1.3
0.6
1.1
1.9
1.4
1.5
2.0
1.4
0.6
2.7
1.6
1.6
2.3
1.5
0.5
0.4
1.1
2.1
1.2
0.1
1.8
3.0 4.2
1.4 1.2 (1.7)
0.0 (0.6) (2.9) (4.1)
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
130
REAL RETURN ON TREASURY BILLS - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
101
103
104
104
106
108
112
114
117
117
114
111
110
104
92
89
87
86
84
85
86
92
96
101
107
114
121
126
134
142
151
161
168
172
178
184
190
199
207
213
224
226
228
231
237
238
242
252
248
238
102
104
103
105
108
111
113
116
116
113
110
109
103
91
88
86
86
83
85
86
92
96
100
106
114
120
125
133
141
150
160
166
171
176
183
188
198
205
212
222
224
227
229
235
236
240
251
246
236
102
102
103
106
109
111
114
114
111
109
107
101
90
87
85
84
82
83
84
90
94
99
104
112
118
123
130
138
148
157
164
168
173
180
185
195
202
208
218
221
223
225
231
232
236
246
242
232
100
101
104
107
109
112
112
109
106
105
99
88
85
83
83
80
82
83
88
92
97
102
109
116
120
128
136
145
155
161
164
170
176
182
191
198
204
214
216
218
221
227
228
232
242
238
228
102
104
108
109
113
112
109
107
105
100
88
85
83
83
80
82
83
89
93
97
103
110
116
121
128
136
145
155
161
165
171
177
182
192
199
205
215
217
219
222
228
229
233
243
238
229
102
106
107
111
110
107
105
104
98
87
84
82
82
79
80
82
87
91
95
101
108
114
119
126
134
143
152
158
162
168
174
179
188
195
202
211
214
216
218
224
225
229
238
234
225
103
105
108
108
105
103
101
96
85
82
80
80
77
79
80
85
89
93
99
106
112
116
123
131
140
149
155
159
164
170
175
184
191
197
206
209
211
213
219
220
223
233
229
220
101
105
104
101
99
98
92
82
79
77
77
75
76
77
82
86
90
95
102
108
112
119
126
135
144
150
153
159
164
170
178
185
190
200
202
204
206
212
212
216
225
222
213
103
103
100
98
97
91
81
78
76
76
74
75
76
81
85
89
94
101
106
111
118
125
133
142
148
151
156
162
167
176
182
188
197
199
201
203
209
210
213
222
218
210
100
97
95
94
88
78
76
74
74
71
73
74
79
82
86
91
98
103
107
114
121
129
138
143
147
152
157
162
170
177
182
191
193
195
197
202
203
207
216
212
203
97
95
94
89
79
76
74
74
72
73
74
79
83
87
92
98
104
108
115
121
130
138
144
147
152
158
163
171
177
183
192
194
196
198
203
204
208
216
213
204
98
97
91
81
78
76
76
74
75
76
81
85
89
94
101
106
111
118
125
133
142
148
151
156
162
167
176
182
188
197
199
201
203
209
210
213
222
218
210
99
93
83
80
78
78
75
77
78
83
87
91
96
103
109
113
120
127
136
145
151
154
160
166
171
179
186
192
201
203
205
207
213
214
218
227
223
214
94
84
81
79
79
76
78
79
84
88
92
98
104
110
115
122
129
138
147
153
157
162
168
173
182
189
195
204
206
208
210
216
217
221
230
226
217
89
86
84
83
81
82
83
89
93
98
103
110
117
121
129
137
146
156
162
166
171
178
183
192
200
206
216
218
220
223
229
230
234
244
240
230
97
94
94
91
93
94
100
105
110
116
124
132
137
145
154
165
176
183
187
193
200
207
217
225
232
243
246
248
251
258
259
264
275
270
259
to see the real growth over any period; thus an
investment of 100 made at the end of 1978 would have
fallen to 97 (allowing for reinvestment of income and
the effect of inflation) in one year but after four years (up
to the end of 1982) would have reached 107 in real
terms. Each figure on the bottom line of the table shows
the real growth up to December 2010 from the year
shown below the figure.
98
97
94
96
97
104
108
114
120
129
136
141
150
159
170
182
189
193
200
207
214
224
233
240
251
254
257
259
267
268
272
284
279
268
100
96
98
100
106
111
116
123
132
139
145
154
163
174
186
193
198
205
212
219
230
238
246
258
261
263
266
273
274
279
291
286
274
97
98
100
107
111
117
124
132
140
145
155
164
175
187
194
199
205
213
220
231
239
247
258
261
264
267
274
275
280
292
287
275
102
103
110
115
121
128
137
144
150
160
169
181
193
200
205
212
220
227
238
247
255
267
270
273
276
283
284
289
302
297
284
102
108
113
119
126
134
142
148
157
166
178
190
197
202
209
216
223
234
243
250
262
265
268
271
278
279
284
296
291
279
107
111
117
124
132
140
145
155
164
175
187
194
199
205
213
220
231
239
247
258
261
264
267
274
275
280
292
287
275
105
110
116
124
131
136
145
154
164
175
182
186
193
200
206
216
224
231
242
245
247
250
257
258
263
274
269
258
105
111
119
125
130
139
147
157
167
174
178
184
191
197
207
214
221
232
234
237
239
246
247
251
262
257
247
106
113
120
124
132
140
150
160
166
170
176
182
188
197
205
211
221
224
226
228
235
236
240
250
246
236
107
113
118
125
132
141
151
157
161
166
172
178
187
193
200
209
211
213
216
222
223
226
236
232
223
106
110
117
124
132
141
147
150
155
161
166
174
181
187
195
198
200
202
207
208
212
221
217
208
104
111
117
125
134
139
142
147
152
157
165
171
177
185
187
189
191
196
197
200
209
205
197
106
113
120
128
133
137
141
146
151
159
165
170
178
180
182
184
189
189
193
201
197
189
106
113
121
125
129
133
138
142
149
155
160
167
169
171
173
177
178
181
189
186
178
107
114
118
121
125
130
134
141
146
151
158
160
161
163
167
168
171
178
175
168
107
111
114
117
122
126
132
137
141
148
149
151
152
157
157
160
167
164
157
104
106
110
114
118
124
128
132
138
140
141
143
147
147
150
156
154
147
102
106
110
113
119
123
127
133
135
136
137
141
142
144
150
148
142
103
107
111
116
120
124
130
132
133
134
138
139
141
147
144
139
104
107
112
116
120
126
127
128
130
133
134
136
142
140
134
103
108
112
116
121
123
124
125
129
129
132
137
135
129
105
109
112
118
119
120
121
125
125
128
133
131
125
104
107
112
113
114
116
119
119
121
127
124
119
103
108
109
110
112
115
115
117
122
120
115
105
106
107
108
111
112
113
118
116
112
101
102
103
106
106
108
113
111
106
101
102
105
105
107
112
110
105
101
104
104
106
111
109
104
103
103
105
109
108
103
100
102
107
105
100
102
106
104
100
104
102
98
98
94
96
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
131
REAL RETURN ON BUILDING SOCIETY ACCOUNT - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
1.4
2.4
2.9
2.4
2.3
2.4
2.7
2.6
2.7
2.5
2.2
2.0
1.8
1.2
0.3
0.0
(0.0)
0.0
(0.2)
(0.2)
(0.2)
0.1
0.3
0.5
0.7
0.9
1.1
1.1
1.1
1.2
1.3
1.5
1.5
1.5
1.4
1.4
1.3
1.4
1.5
1.5
1.6
1.5
1.5
1.5
1.5
1.5
1.4
1.4
1.3
1.2
3.4
3.6
2.7
2.5
2.6
3.0
2.7
2.8
2.6
2.2
2.1
1.8
1.1
0.2
(0.1)
(0.1)
(0.1)
(0.3)
(0.3)
(0.2)
0.1
0.2
0.5
0.6
0.9
1.0
1.1
1.1
1.2
1.3
1.5
1.5
1.5
1.4
1.4
1.3
1.4
1.5
1.5
1.6
1.5
1.5
1.5
1.5
1.5
1.4
1.4
1.3
1.2
3.9
2.4
2.2
2.4
2.9
2.6
2.8
2.5
2.1
2.0
1.7
1.0
(0.0)
(0.3)
(0.4)
(0.3)
(0.5)
(0.5)
(0.4)
(0.1)
0.1
0.3
0.5
0.8
1.0
1.0
1.0
1.1
1.2
1.4
1.4
1.4
1.4
1.3
1.3
1.4
1.4
1.4
1.5
1.5
1.5
1.4
1.4
1.4
1.4
1.4
1.3
1.2
0.9
1.4
1.9
2.6
2.4
2.6
2.3
1.9
1.7
1.5
0.7
(0.3)
(0.6)
(0.7)
(0.6)
(0.8)
(0.8)
(0.7)
(0.3)
(0.1)
0.2
0.4
0.6
0.8
0.9
0.9
1.0
1.1
1.3
1.3
1.3
1.3
1.3
1.2
1.3
1.3
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.3
1.3
1.2
1.1
1.9
2.5
3.2
2.8
2.9
2.5
2.0
1.8
1.6
0.7
(0.4)
(0.7)
(0.8)
(0.7)
(0.9)
(0.9)
(0.8)
(0.4)
(0.1)
0.1
0.3
0.6
0.8
0.9
0.9
1.0
1.1
1.3
1.4
1.3
1.3
1.3
1.2
1.3
1.4
1.4
1.5
1.4
1.4
1.4
1.4
1.4
1.3
1.3
1.2
1.1
3.0
3.8
3.1
3.2
2.6
2.1
1.8
1.5
0.6
(0.7)
(1.0)
(1.0)
(0.9)
(1.1)
(1.0)
(0.9)
(0.5)
(0.3)
0.0
0.3
0.6
0.8
0.8
0.9
1.0
1.1
1.3
1.3
1.3
1.3
1.3
1.2
1.3
1.3
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.3
1.3
1.2
1.1
4.7
3.1
3.2
2.5
1.9
1.6
1.3
0.2
(1.1)
(1.4)
(1.4)
(1.2)
(1.4)
(1.3)
(1.2)
(0.7)
(0.4)
(0.1)
0.1
0.4
0.7
0.7
0.8
0.9
1.0
1.2
1.3
1.3
1.2
1.2
1.1
1.2
1.3
1.3
1.4
1.4
1.4
1.3
1.3
1.3
1.3
1.3
1.2
1.1
1.5
2.5
1.8
1.2
1.0
0.7
(0.4)
(1.8)
(2.0)
(1.9)
(1.7)
(1.9)
(1.8)
(1.6)
(1.1)
(0.8)
(0.4)
(0.1)
0.2
0.5
0.5
0.6
0.7
0.9
1.1
1.1
1.1
1.1
1.1
1.0
1.1
1.2
1.2
1.3
1.3
1.3
1.2
1.3
1.2
1.2
1.2
1.1
1.0
3.5
2.0
1.1
0.9
0.6
(0.7)
(2.2)
(2.4)
(2.3)
(2.0)
(2.2)
(2.0)
(1.8)
(1.3)
(0.9)
(0.5)
(0.2)
0.1
0.4
0.5
0.6
0.7
0.8
1.1
1.1
1.1
1.1
1.1
1.0
1.1
1.2
1.2
1.3
1.3
1.3
1.2
1.3
1.2
1.2
1.2
1.1
1.0
0.6
(0.1)
0.1
(0.1)
(1.5)
(3.2)
(3.3)
(3.0)
(2.6)
(2.8)
(2.5)
(2.2)
(1.6)
(1.2)
(0.8)
(0.5)
(0.1)
0.3
0.3
0.4
0.5
0.7
1.0
1.0
1.0
1.0
1.0
0.9
1.0
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.1
1.1
1.0
0.9
(0.7)
(0.1)
(0.3)
(2.0)
(3.9)
(3.9)
(3.5)
(3.0)
(3.1)
(2.8)
(2.5)
(1.8)
(1.3)
(0.9)
(0.5)
(0.1)
0.2
0.3
0.4
0.5
0.7
1.0
1.0
1.0
1.0
1.0
0.9
1.0
1.1
1.2
1.3
1.2
1.2
1.2
1.2
1.2
1.2
1.1
1.0
0.9
0.5
(0.2)
(2.4)
(4.7)
(4.5)
(4.0)
(3.3)
(3.4)
(3.1)
(2.7)
(1.9)
(1.4)
(0.9)
(0.5)
(0.0)
0.3
0.4
0.5
0.6
0.8
1.1
1.1
1.1
1.1
1.1
1.0
1.1
1.2
1.2
1.3
1.3
1.3
1.3
1.3
1.2
1.2
1.2
1.1
0.9
(0.8)
(3.8)
(6.3)
(5.7)
(4.8)
(3.9)
(4.0)
(3.5)
(3.0)
(2.1)
(1.6)
(1.0)
(0.6)
(0.1)
0.3
0.4
0.5
0.6
0.8
1.1
1.2
1.1
1.1
1.1
1.0
1.1
1.2
1.3
1.4
1.3
1.3
1.3
1.3
1.3
1.2
1.2
1.1
1.0
(6.8)
(9.0)
(7.3)
(5.8)
(4.5)
(4.5)
(3.9)
(3.3)
(2.3)
(1.6)
(1.0)
(0.6)
(0.0)
0.4
0.4
0.6
0.7
0.9
1.2
1.3
1.2
1.2
1.2
1.1
1.2
1.3
1.3
1.4
1.4
1.4
1.3
1.4
1.3
1.3
1.3
1.2
1.0
(11.1)
(7.6)
(5.5)
(3.9)
(4.0)
(3.4)
(2.8)
(1.7)
(1.1)
(0.4)
0.0
0.6
0.9
1.0
1.1
1.2
1.4
1.7
1.7
1.7
1.6
1.5
1.5
1.6
1.6
1.7
1.8
1.7
1.7
1.6
1.6
1.6
1.6
1.5
1.4
1.2
the real rate of return in each year since 1960. The table
can be used to see the real rate of return over any period;
thus a purchase made at the end of 1960 would have
grown by 1.4% (allowing for reinvestment of income) in
one year but over the first three years (up to the end of
1963) would have given an average annual real return of
2.9%. Each figure on the bottom line of the table shows the
real growth up to December 2010 from the year shown
below the figure.
(3.8)
(2.6)
(1.4)
(2.1)
(1.7)
(1.3)
(0.3)
0.3
0.8
1.2
1.7
2.0
2.0
2.0
2.1
2.2
2.5
2.5
2.4
2.3
2.2
2.1
2.2
2.2
2.2
2.3
2.2
2.2
2.1
2.1
2.0
2.0
1.9
1.8
1.6
(1.3)
(0.2) 1.0
(1.6) (1.7) (4.3)
(1.2) (1.2) (2.2) (0.1)
(0.8) (0.7) (1.2) 0.3
0.4 0.7 0.6 2.3
0.9 1.3 1.3 2.8
1.4 1.8 2.0 3.2
1.8 2.2 2.4 3.5
2.3 2.7 2.9 3.9
2.6 3.0 3.2 4.2
2.5 2.8 3.0 3.9
2.5 2.8 3.0 3.7
2.5 2.8 2.9 3.6
2.6 2.9 3.1 3.7
2.9 3.2 3.3 4.0
2.9 3.1 3.3 3.8
2.7 3.0 3.1 3.6
2.6 2.9 3.0 3.4
2.5 2.7 2.8 3.2
2.4 2.5 2.6 3.0
2.4 2.6 2.7 3.1
2.5 2.6 2.7 3.1
2.5 2.6 2.7 3.1
2.5 2.7 2.8 3.1
2.5 2.6 2.7 3.0
2.4 2.5 2.6 2.9
2.3 2.5 2.5 2.8
2.3 2.4 2.5 2.8
2.2 2.3 2.4 2.6
2.2 2.3 2.3 2.6
2.1 2.2 2.3 2.5
2.0 2.1 2.1 2.3
1.8 1.9 1.9 2.1
0.8
3.6
3.8
4.1
4.3
4.6
4.8
4.4
4.2
4.0
4.1
4.3
4.1
3.9
3.7
3.4
3.2
3.3
3.3
3.2
3.3
3.1
3.0
2.9
2.9
2.8
2.7
2.6
2.4
2.2
6.4
5.3
5.2
5.1
5.4
5.5
4.9
4.6
4.4
4.4
4.6
4.4
4.1
3.9
3.6
3.4
3.4
3.4
3.4
3.4
3.2
3.1
3.0
3.0
2.8
2.8
2.6
2.5
2.2
4.1
4.6
4.7
5.2
5.3
4.6
4.4
4.1
4.2
4.4
4.2
3.9
3.7
3.4
3.2
3.2
3.2
3.2
3.2
3.1
3.0
2.9
2.8
2.7
2.6
2.5
2.3
2.1
5.2
5.0
5.5
5.6
4.7
4.4
4.1
4.2
4.5
4.2
3.9
3.7
3.4
3.1
3.2
3.2
3.1
3.2
3.0
2.9
2.8
2.8
2.6
2.5
2.4
2.3
2.0
4.8
5.7
5.7
4.6
4.3
4.0
4.1
4.4
4.1
3.8
3.5
3.2
2.9
3.0
3.0
3.0
3.1
2.9
2.8
2.7
2.6
2.5
2.4
2.3
2.1
1.9
6.6
6.2
4.5
4.1
3.8
3.9
4.3
4.1
3.7
3.4
3.1
2.8
2.9
2.9
2.9
3.0
2.8
2.7
2.6
2.5
2.4
2.3
2.2
2.0
1.8
5.7
3.5
3.3
3.1
3.4
4.0
3.7
3.3
3.0
2.7
2.4
2.6
2.6
2.6
2.7
2.6
2.5
2.4
2.3
2.2
2.1
2.0
1.8
1.6
1.4
2.1
2.2
2.8
3.6
3.4
3.0
2.7
2.4
2.1
2.3
2.4
2.4
2.5
2.4
2.2
2.2
2.1
2.0
1.9
1.9
1.7
1.4
2.8
2.6
3.3
4.2
3.8
3.3
2.9
2.5
2.2
2.4
2.5
2.5
2.6
2.4
2.3
2.2
2.2
2.1
2.0
1.9
1.7
1.4
2.5
3.6
4.6
4.0
3.4
2.9
2.5
2.1
2.4
2.4
2.4
2.6
2.4
2.3
2.2
2.1
2.0
1.9
1.8
1.6
1.3
4.6
5.7
4.5
3.6
3.0
2.5
2.1
2.3
2.4
2.4
2.6
2.4
2.3
2.1
2.1
2.0
1.9
1.8
1.6
1.3
6.8
4.5
3.2
2.6
2.1
1.7
2.0
2.2
2.2
2.4
2.2
2.1
2.0
1.9
1.8
1.7
1.6
1.4
1.1
2.2
1.5
1.2
0.9
0.6
1.2
1.5
1.6
1.9
1.8
1.6
1.6
1.6
1.5
1.4
1.3
1.1
0.8
0.8
0.7
0.5
0.3
1.0
1.4
1.6
1.9
1.7
1.6
1.5
1.5
1.4
1.3
1.3
1.0
0.7
0.7
0.4 0.2
0.1 (0.2) (0.5)
1.1 1.2 1.8
1.5 1.8 2.3
1.7 1.9 2.3
2.0 2.2 2.7
1.8 2.0 2.3
1.7 1.8 2.0
1.6 1.7 1.9
1.6 1.7 1.8
1.4 1.5 1.7
1.4 1.4 1.6
1.3 1.3 1.4
1.1 1.1 1.2
0.7 0.7 0.7
4.2
3.7
3.3
3.5
2.9
2.5
2.2
2.2
1.9
1.8
1.6
1.3
0.8
3.3
2.9
3.3
2.5
2.1
1.9
1.9
1.6
1.5
1.4
1.0
0.6
2.5
3.2
2.3
1.8
1.6
1.6
1.4
1.3
1.1
0.8
0.3
4.0
2.2 0.4
1.6 0.5 0.5
1.4 0.6 0.6 0.7
1.5 0.8 1.0 1.2 1.7
1.2 0.7 0.7 0.8 0.8 (0.1)
1.1 0.7 0.7 0.8 0.8 0.3 0.7
1.0 0.6 0.6 0.6 0.6 0.2 0.3 (0.1)
0.6 0.2 0.2 0.1 0.0 (0.4) (0.5) (1.1) (2.1)
0.1 (0.3) (0.4) (0.5) (0.7) (1.2) (1.5) (2.2) (3.2) (4.4)
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
132
REAL RETURN ON BUILDING SOCIETY ACCOUNT - GROSS INCOME RE-INVESTED

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
.
101
105
109
110
112
115
121
123
127
127
127
127
126
118
105
101
99
100
96
96
97
103
107
112
118
126
133
135
138
142
149
159
162
163
164
165
164
171
176
181
188
189
190
191
194
194
195
195
191
183
103
107
108
110
114
119
121
125
126
125
125
124
116
103
99
98
99
95
94
95
101
105
111
116
124
131
133
137
140
146
156
160
161
162
162
162
168
174
178
185
186
187
188
192
191
193
193
189
180
104
105
107
110
115
117
121
122
121
121
120
112
100
96
95
96
91
91
92
98
102
107
112
120
127
129
132
135
142
151
155
156
157
157
156
163
168
172
179
180
181
182
185
185
187
186
182
174
101
103
106
111
113
116
117
116
117
116
108
96
92
91
92
88
88
89
94
98
103
108
115
122
124
127
130
136
146
149
150
151
151
150
157
162
166
173
173
174
175
178
178
180
179
176
168
102
105
110
112
115
116
115
116
115
107
95
92
90
91
87
87
88
94
97
102
107
114
121
123
126
129
135
144
148
149
150
150
149
155
161
165
171
172
173
174
177
177
178
178
174
166
103
108
109
113
114
113
114
113
105
93
90
89
89
86
86
86
92
96
100
105
112
119
120
124
127
133
142
145
146
147
147
146
152
157
161
168
169
169
171
174
173
175
174
171
163
105
106
110
111
110
110
109
102
91
87
86
87
83
83
84
89
93
98
102
109
115
117
120
123
129
138
141
142
143
143
142
148
153
157
163
164
164
166
168
168
170
169
166
159
101
105
106
105
105
105
97
87
83
82
83
79
79
80
85
89
93
98
104
110
112
115
118
123
131
134
135
136
136
136
141
146
150
156
156
157
158
161
161
162
162
158
151
103
104
103
104
103
96
85
82
81
82
78
78
79
84
87
92
96
103
108
110
113
116
121
129
132
133
134
134
134
139
144
148
153
154
155
156
159
158
160
159
156
149
101
100
100
100
93
82
79
78
79
76
76
76
81
84
89
93
99
105
106
109
112
117
125
128
129
130
130
129
135
139
143
148
149
150
151
153
153
154
154
151
144
99
100
99
92
82
79
78
79
75
75
76
81
84
88
92
99
104
106
109
111
116
124
127
128
129
129
129
134
138
142
147
148
149
150
152
152
153
153
150
143
100
100
93
83
79
78
79
76
76
76
81
84
89
93
99
105
106
109
112
117
125
128
129
130
130
129
135
139
143
148
149
150
151
154
153
154
154
151
144
99
92
82
79
78
79
75
75
76
81
84
88
93
99
105
106
109
112
117
125
127
128
129
130
129
134
139
142
148
148
149
150
153
153
154
154
150
144
93
83
80
79
79
76
76
76
81
85
89
93
100
105
107
110
112
118
126
128
129
130
131
130
135
140
143
149
150
150
151
154
154
155
155
152
145
to see the real growth over any period; thus an investment
of 100 made at the end of 1960 would have grown to
101 (allowing for reinvestment of income and the effect of
inflation) in one year but after three years (up to the end of
1963) would have reached 109 in real terms. Each figure
on the bottom line of the table shows the real growth up to
89
85
84
85
81
81
82
87
91
96
100
107
113
115
118
121
126
135
138
139
140
140
139
145
150
154
160
160
161
162
165
165
166
166
163
155
96
95
96
92
92
92
98
102
108
113
120
127
129
132
136
142
152
155
156
157
158
157
163
169
173
180
181
181
183
186
186
187
187
183
175
99
100
95
95
96
102
106
112
117
125
132
134
138
141
148
158
161
163
164
164
163
170
175
180
187
188
189
190
193
193
194
194
190
182
101
97
97
97
104
108
113
119
127
134
136
140
143
150
160
163
165
166
166
165
172
178
182
189
190
191
193
196
196
197
197
193
184
96
96
96
103
107
112
118
126
133
135
138
142
148
158
162
163
164
165
164
170
176
180
188
188
189
191
194
194
195
195
191
183
100
101
107
112
117
123
131
139
141
144
148
155
166
169
170
172
172
171
178
184
189
196
197
198
199
203
203
204
204
200
191
101
107
112
117
123
131
139
141
145
148
155
166
169
171
172
172
171
178
184
189
196
197
198
200
203
203
204
204
200
191
106
111
117
122
130
138
140
144
147
154
164
168
169
170
171
170
177
183
187
195
196
197
198
201
201
203
202
198
189
104
109
115
122
129
131
135
138
145
154
158
159
160
160
160
166
172
176
183
184
185
186
189
189
190
190
186
178
105
110
118
124
126
130
133
139
148
152
153
154
154
153
160
165
169
176
176
177
179
182
182
183
183
179
171
105
112
118
120
123
126
132
141
144
145
146
146
146
152
157
161
167
168
169
170
173
173
174
174
170
163
107
113
114
117
120
126
135
137
139
139
140
139
145
150
153
159
160
161
162
165
165
166
166
162
155
106
107
110
113
118
126
129
130
131
131
130
136
140
144
150
150
151
152
155
154
156
155
152
146
101
104
107
112
119
122
123
124
124
123
128
133
136
141
142
143
144
146
146
147
147
144
138
103
105
110
118
120
121
122
122
122
127
131
134
139
140
141
142
144
144
145
145
142
136
102
107
115
117
118
119
119
118
123
127
130
136
136
137
138
140
140
141
141
138
132
105
112
114
115
116
116
115
120
124
127
132
133
134
135
137
137
138
138
135
129
107
109
110
111
111
110
115
119
122
127
127
128
129
131
131
132
132
129
123
102
103
104
104
103
108
111
114
118
119
120
120
122
122
123
123
121
115
101
101
102
101
105
109
111
116
116
117
118
120
120
121
120
118
113
101
101
100
104
108
111
115
116
116
117
119
119
120
120
117
112
100
100
104
107
110
114
115
115
116
118
118
119
119
116
111
99
104
107
110
114
115
115
116
118
118
119
119
116
111
104
108
110
115
115
116
117
119
119
119
119
117
112
103
106
110
111
111
112
114
114
115
114
112
107
102
107
107
108
108
110
110
111
111
108
104
104
104
105
106
108
107
108
108
106
101
100
101
102
103
103
104
104
102
97
101
101
103
103
104
103
101
97
101
102
102
103
103
101
96
102
102
102
102
100
96
100
101
101
98
94
101
101
98
94
100
98
94
98
94
96
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
133
REAL RETURN ON INDEX-LINKED GILTS

GROSS INCOME RE-INVESTED

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
(4.3)
(1.2)
(2.7)
(1.5)
(0.6)
0.6
1.4
0.6
0.6
1.9
3.3
2.1
2.6
2.7
3.1
3.9
3.9
3.7
3.4
3.5
3.5
3.6
3.7
3.5
3.4
3.2
3.2
3.2
1.9
(1.9)
(0.5)
0.4
1.6
2.3
1.3
1.3
2.6
4.1
2.7
3.2
3.2
3.7
4.5
4.4
4.2
3.8
3.9
3.9
4.0
4.1
3.8
3.7
3.5
3.4
3.5
(5.5)
(1.7)
(0.1)
1.5
2.4
1.2
1.2
2.7
4.4
2.8
3.3
3.3
3.8
4.7
4.6
4.3
4.0
4.0
4.0
4.1
4.2
3.9
3.8
3.5
3.5
3.6
2.3
2.7
3.9
4.5
2.7
2.3
3.9
5.7
3.8
4.2
4.2
4.6
5.5
5.4
5.0
4.6
4.6
4.6
4.6
4.7
4.4
4.2
3.9
3.9
4.0
3.1
4.8
5.3
2.7
2.3
4.2
6.2
3.9
4.4
4.4
4.8
5.8
5.6
5.2
4.7
4.7
4.7
4.7
4.8
4.5
4.3
4.0
4.0
4.0
6.5
6.4
2.6
2.2
4.4
6.7
4.1
4.6
4.5
5.0
6.1
5.8
5.4
4.8
4.9
4.8
4.8
4.9
4.5
4.4
4.1
4.0
4.1
6.3
0.8
0.7
3.9
6.8
3.7
4.3
4.3
4.8
6.0
5.7
5.3
4.7
4.7
4.7
4.7
4.8
4.4
4.3
3.9
3.9
4.0
(4.5)
(1.9)
3.2
6.9
3.1
4.0
4.0
4.7
6.0
5.7
5.2
4.6
4.6
4.6
4.6
4.7
4.3
4.2
3.8
3.8
3.9
0.7
7.2
11.0
5.2
5.8
5.5
6.0
7.4
6.9
6.2
5.5
5.4
5.3
5.3
5.4
4.9
4.7
4.3
4.2
4.3
14.1
16.5
6.7
7.1
6.5
7.0
8.3
7.7
6.8
5.9
5.9
5.7
5.6
5.7
5.2
4.9
4.5
4.4
4.5
18.9
3.1 (10.5)
4.9 (1.5)
4.6
0.3
5.6
2.5
7.4
5.3
6.8
4.9
5.9
4.2
5.1
3.5
5.1
3.6
5.0
3.7
5.0
3.8
5.1
4.0
4.6
3.5
4.4
3.4
3.9
3.0
3.9
3.0
4.0
3.2
8.5
6.2
7.3
9.6
8.3
6.9
5.6
5.6
5.4
5.3
5.5
4.8
4.5
4.1
4.0
4.1
4.0
6.7
10.0
8.3
6.6
5.2
5.2
5.0
5.0
5.2
4.5
4.2
3.7
3.7
3.8
9.4
13.2
9.7
7.2
5.4
5.4
5.1
5.1
5.3
4.5
4.3
3.7
3.7
3.8
17.1
9.9
6.5
4.4
4.6
4.4
4.5
4.8
4.0
3.7
3.2
3.2
3.4
3.2
1.6
0.5
1.7
2.1
2.6
3.2
2.5
2.4
1.9
2.0
2.3
0.1
(0.7)
1.2
1.8
2.4
3.2
2.4
2.3
1.8
1.9
2.2
(1.6)
1.7
2.4
3.0
3.8
2.8
2.6
2.0
2.1
2.4
5.1
4.5
4.6
5.2
3.7
3.3
2.5
2.6
2.9
3.9
4.4
5.2
3.3
2.9
2.1
2.2
2.6
4.9
5.8
3.1
2.7
1.7
2.0
2.4
6.7
2.2
2.0
0.9
1.4
2.0
(2.1)
(0.3)
(0.9)
0.1
1.1
1.4
(0.4)
0.8
1.9
(2.1)
0.5
2.1
3.1
4.2
5.3
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GROSS INCOME RE-INVESTED

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
96
98
92
94
97
103
110
105
106
121
144
128
139
145
158
186
191
192
189
198
206
216
231
226
229
224
231
243
102
96
98
102
108
115
110
111
126
150
134
146
151
166
194
200
200
197
207
215
226
241
236
239
234
241
254
94
97
100
106
113
108
108
124
147
132
143
148
162
190
196
196
193
203
211
221
236
231
235
230
237
249
102
105
112
119
114
115
131
156
139
151
157
172
201
208
208
205
215
223
234
250
245
248
243
251
264
103
110
117
111
112
128
152
136
148
154
168
197
203
203
200
210
218
229
244
239
243
238
245
258
106
113
108
109
124
148
132
143
149
163
191
197
197
194
204
212
222
237
232
236
231
238
250
106
102
102
117
139
124
135
140
153
179
185
185
182
191
199
209
223
218
221
217
223
235
95
96
110
130
117
127
132
144
169
174
174
171
180
187
196
210
205
208
204
210
221
101
115
137
122
133
138
151
177
182
182
179
189
196
206
219
215
218
213
220
232
114
136
121
132
137
150
175
181
181
178
187
194
204
218
213
216
212
218
230
119
106
115
120
131
154
158
159
156
164
170
179
191
187
190
186
191
202
89
97
101
110
129
133
133
131
138
143
150
161
157
160
156
161
170
108
113
123
144
149
149
147
154
160
168
179
176
178
175
180
190
104
114
133
137
138
135
142
148
155
165
162
164
161
166
175
109
128
132
132
130
137
142
149
159
156
158
155
160
168
117
121
121
119
125
130
136
145
142
144
141
146
154
103
103
102
107
111
116
124
122
123
121
125
131
100
99
104
108
113
120
118
120
117
121
127
98
103
107
113
120
118
119
117
121
127
105
109
115
122
120
121
119
123
129
104
109
116
114
116
113
117
123
105
112
110
111
109
112
118
107
105
106
104
107
113
98
99
97
100
106
101
99
102
108
98
101
106
103
109
105
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 February 2011
134
UK real return on equities - gross income re-invested

(annual average rates of return between year ends)
11.5
3.7
3.6
3.2
4.9
4.8
6.6
4.5
4.2
4.9
4.6
4.1
3.8
3.3
3.0
1.6
0.4
(0.2)
0.1
0.4
(1.6)
(0.2)
1.3
1.4
2.0
2.5
2.6
3.0
3.5
2.8
2.9
2.2
3.1
3.7
4.0
4.2
4.5
3.8
3.5
3.2
2.7
3.1
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.0
4.0
3.7
3.6
4.2
4.9
4.8
4.7
4.5
4.7
4.5
4.5
4.3
4.7
5.1
4.8
4.6
4.9
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.0
4.0
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.1
4.9
5.0
5.1
5.3
5.1
5.3
5.3
5.5
5.5
5.7
5.5
5.3
5.0
5.1
5.1
5.2
5.3
5.3
4.9
5.0
5.1
(3.5)
(0.1)
0.5
3.4
3.5
5.8
3.6
3.4
4.2
4.0
3.5
3.2
2.7
2.4
1.0
(0.3)
(0.8)
(0.5)
(0.1)
(2.2)
(0.7)
0.9
0.9
1.6
2.2
2.3
2.7
3.2
2.6
2.6
1.9
2.9
3.5
3.8
4.0
4.3
3.6
3.3
3.0
2.5
2.9
3.2
3.4
3.6
3.6
3.9
3.7
3.4
3.2
3.2
3.1
2.9
3.3
3.9
3.9
3.6
3.4
4.1
4.8
4.7
4.6
4.4
4.6
4.4
4.4
4.2
4.6
5.0
4.7
4.5
4.8
4.9
4.2
2.9
3.8
3.6
4.0
3.9
3.8
4.0
3.9
4.1
4.3
4.6
4.7
4.9
4.9
4.8
5.1
4.8
4.9
5.0
5.2
5.1
5.2
5.3
5.4
5.5
5.6
5.5
5.3
4.9
5.0
5.1
5.2
5.2
5.2
4.8
5.0
5.0
3.5
2.6
5.7
5.3
7.8
4.8
4.4
5.2
4.8
4.2
3.8
3.2
2.9
1.3
(0.0)
(0.7)
(0.3)
0.1
(2.1)
(0.5)
1.1
1.1
1.8
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.7
4.0
4.2
4.5
3.8
3.5
3.2
2.7
3.0
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.0
4.1
3.7
3.6
4.2
4.9
4.8
4.7
4.6
4.8
4.5
4.6
4.4
4.7
5.2
4.8
4.6
5.0
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.0
4.0
4.2
4.4
4.7
4.8
5.0
5.0
4.9
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.1
5.1
1.8
6.9
5.9
8.9
5.1
4.5
5.4
5.0
4.3
3.8
3.2
2.8
1.2
(0.3)
(0.9)
(0.6)
(0.1)
(2.4)
(0.8)
0.9
1.0
1.7
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.7
4.0
4.2
4.6
3.8
3.5
3.2
2.6
3.0
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.2
3.1
3.4
4.1
4.1
3.8
3.6
4.2
4.9
4.8
4.7
4.6
4.8
4.5
4.6
4.4
4.7
5.2
4.9
4.6
5.0
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.1
4.0
4.2
4.4
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.4
5.0
5.1
5.2
5.3
5.3
5.3
4.9
5.1
5.1
HOW TO USE TABLES OF TOTAL RETURNS

12.3
8.0
11.4
5.9
5.1
6.1
5.5
4.6
4.1
3.3
2.9
1.1
(0.4)
(1.1)
(0.7)
(0.2)
(2.6)
(0.9)
0.9
1.0
1.7
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.8
4.1
4.3
4.6
3.9
3.5
3.2
2.7
3.1
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.1
4.1
3.8
3.6
4.2
5.0
4.9
4.8
4.6
4.8
4.6
4.6
4.4
4.8
5.3
4.9
4.7
5.0
5.1
4.4
3.0
4.0
3.8
4.1
4.0
3.9
4.1
4.0
4.3
4.5
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.2
5.4
5.2
5.4
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.2
5.2
5.3
5.4
5.3
4.9
5.1
5.1
3.8
11.0
3.9
3.4
4.8
4.4
3.5
3.1
2.3
2.1
0.1
(1.4)
(2.1)
(1.6)
(1.0)
(3.5)
(1.6)
0.3
0.4
1.2
1.9
2.1
2.6
3.2
2.4
2.5
1.7
2.8
3.5
3.8
4.1
4.4
3.7
3.3
3.0
2.4
2.8
3.2
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.1
2.9
3.3
3.9
4.0
3.6
3.5
4.1
4.9
4.8
4.6
4.5
4.7
4.5
4.5
4.3
4.7
5.1
4.8
4.5
4.9
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.1
4.8
5.0
5.1
5.3
5.1
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
18.6
3.9
3.2
5.1
4.5
3.5
3.0
2.2
1.9
(0.2)
(1.9)
(2.6)
(2.0)
(1.4)
(4.0)
(2.0)
0.1
0.2
1.1
1.8
2.0
2.6
3.2
2.4
2.4
1.6
2.8
3.5
3.8
4.1
4.4
3.7
3.3
2.9
2.4
2.8
3.2
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.1
2.9
3.3
3.9
4.0
3.6
3.4
4.1
4.9
4.8
4.6
4.5
4.7
4.5
4.5
4.3
4.7
5.2
4.8
4.5
4.9
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
(8.9)
(3.7)
1.0
1.2
0.7
0.6
0.0
(0.1)
(2.1)
(3.7)
(4.3)
(3.5)
(2.7)
(5.4)
(3.2)
(1.0)
(0.7)
0.2
1.0
1.3
1.9
2.5
1.7
1.8
1.0
2.2
3.0
3.3
3.6
4.0
3.2
2.8
2.5
1.9
2.4
2.8
3.0
3.2
3.3
3.6
3.4
3.1
2.8
2.9
2.8
2.6
3.0
3.7
3.7
3.4
3.2
3.8
4.6
4.5
4.4
4.3
4.5
4.2
4.3
4.1
4.5
5.0
4.6
4.3
4.8
4.8
4.1
2.7
3.7
3.4
3.8
3.8
3.6
3.8
3.8
4.0
4.2
4.5
4.6
4.8
4.8
4.8
5.0
4.7
4.8
5.0
5.2
5.0
5.2
5.2
5.4
5.4
5.6
5.4
5.2
4.9
5.0
5.0
5.1
5.2
5.2
4.7
4.9
5.0
1.9
6.3
4.9
3.3
2.6
1.6
1.3
(1.2)
(3.2)
(3.8)
(3.0)
(2.2)
(5.1)
(2.8)
(0.4)
(0.2)
0.8
1.6
1.8
2.4
3.1
2.2
2.3
1.4
2.7
3.5
3.8
4.1
4.5
3.6
3.2
2.9
2.3
2.7
3.1
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.0
2.8
3.2
3.9
4.0
3.6
3.4
4.1
4.9
4.8
4.7
4.5
4.8
4.5
4.5
4.3
4.7
5.2
4.8
4.6
5.0
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.4
5.2
5.3
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.1
5.2
5.3
5.4
5.3
4.9
5.1
5.1
10.9
6.4
3.7
2.8
1.5
1.2
(1.6)
(3.8)
(4.4)
(3.5)
(2.6)
(5.7)
(3.1)
(0.6)
(0.3)
0.7
1.6
1.8
2.5
3.2
2.3
2.3
1.4
2.7
3.5
3.9
4.2
4.6
3.7
3.3
2.9
2.3
2.8
3.2
3.4
3.6
3.7
4.0
3.8
3.4
3.1
3.2
3.1
2.9
3.3
4.0
4.0
3.7
3.5
4.2
5.0
4.9
4.7
4.6
4.8
4.5
4.6
4.4
4.8
5.3
4.9
4.6
5.0
5.1
4.3
2.9
3.9
3.7
4.0
4.0
3.8
4.0
4.0
4.2
4.4
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.2
5.4
5.2
5.4
5.5
5.6
5.7
5.8
5.6
5.4
5.0
5.2
5.2
5.3
5.4
5.3
4.9
5.1
5.1
2.1
0.3
0.2
(0.7)
(0.7)
(3.6)
(5.7)
(6.2)
(5.0)
(3.8)
(7.1)
(4.2)
(1.4)
(1.1)
0.1
1.0
1.3
2.0
2.8
1.8
1.9
1.0
2.4
3.2
3.6
3.9
4.3
3.4
3.0
2.7
2.0
2.5
3.0
3.2
3.4
3.5
3.8
3.6
3.3
2.9
3.0
2.9
2.7
3.1
3.8
3.9
3.5
3.3
4.0
4.9
4.8
4.6
4.5
4.7
4.4
4.5
4.2
4.7
5.2
4.8
4.5
4.9
5.0
4.2
2.8
3.8
3.6
3.9
3.9
3.7
3.9
3.9
4.1
4.3
4.6
4.7
4.9
4.9
4.9
5.2
4.8
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.8
5.6
5.4
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
(1.5)
(0.7)
(1.6)
(1.3)
(4.7)
(6.9)
(7.3)
(5.9)
(4.5)
(7.9)
(4.7)
(1.7)
(1.3)
(0.1)
1.0
1.3
2.0
2.8
1.8
1.9
1.0
2.4
3.3
3.7
4.0
4.4
3.5
3.1
2.7
2.0
2.5
3.0
3.3
3.5
3.5
3.9
3.6
3.3
3.0
3.1
2.9
2.7
3.1
3.9
3.9
3.5
3.3
4.1
4.9
4.8
4.7
4.5
4.8
4.5
4.5
4.3
4.7
5.2
4.8
4.6
5.0
5.0
4.2
2.8
3.8
3.6
4.0
3.9
3.8
3.9
3.9
4.1
4.4
4.6
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.4
5.2
5.3
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.1
5.2
5.3
5.4
5.3
4.9
5.1
5.1
0.0
(1.7)
(1.3)
(5.5)
(8.0)
(8.3)
(6.5)
(4.8)
(8.6)
(5.1)
(1.7)
(1.3)
0.0
1.2
1.4
2.2
3.1
2.0
2.1
1.1
2.6
3.5
3.9
4.2
4.7
3.7
3.2
2.8
2.1
2.7
3.1
3.4
3.6
3.7
4.0
3.8
3.4
3.1
3.2
3.0
2.8
3.2
4.0
4.0
3.6
3.4
4.2
5.1
4.9
4.8
4.6
4.9
4.6
4.6
4.4
4.8
5.3
4.9
4.7
5.1
5.1
4.3
2.8
3.9
3.7
4.0
4.0
3.8
4.0
4.0
4.2
4.5
4.7
4.8
5.1
5.1
5.0
5.3
5.0
5.1
5.2
5.5
5.3
5.4
5.5
5.7
5.7
5.9
5.7
5.5
5.1
5.2
5.2
5.4
5.4
5.4
5.0
5.1
5.2
(3.4)
(2.0) (0.5)
(7.3) (9.1) (17.0)
(9.9) (11.9) (17.2) (17.3)
(9.8) (11.4) (14.7) (13.5)
(7.5) (8.3) (10.2) (7.7)
(5.5) (5.9) (6.9) (4.2)
(9.7) (10.5) (12.1) (11.1)
(5.6) (5.9) (6.6) (4.8)
(1.9) (1.7) (1.8)
0.5
(1.4) (1.3) (1.3)
0.8
0.0
0.3
0.4
2.6
1.2
1.6
1.8
3.9
1.5
1.9
2.1
4.1
2.4
2.8
3.1
4.9
3.2
3.7
4.0
5.8
2.1
2.5
2.7
4.3
2.2
2.5
2.7
4.2
1.1
1.4
1.5
2.8
2.7
3.1
3.3
4.6
3.7
4.0
4.3
5.6
4.1
4.5
4.7
6.0
4.4
4.8
5.0
6.3
4.9
5.2
5.5
6.7
3.8
4.2
4.4
5.5
3.4
3.6
3.8
4.8
2.9
3.2
3.3
4.3
2.2
2.4
2.5
3.4
2.8
3.0
3.1
4.0
3.2
3.5
3.6
4.5
3.5
3.8
3.9
4.7
3.8
4.0
4.1
5.0
3.8
4.0
4.2
5.0
4.2
4.4
4.6
5.3
3.9
4.1
4.2
5.0
3.5
3.7
3.8
4.6
3.2
3.3
3.5
4.1
3.3
3.5
3.6
4.2
3.1
3.3
3.4
4.0
2.9
3.0
3.1
3.7
3.3
3.5
3.6
4.2
4.1
4.3
4.4
5.0
4.1
4.3
4.4
5.0
3.7
3.9
4.0
4.6
3.5
3.7
3.8
4.3
4.3
4.5
4.6
5.1
5.2
5.4
5.5
6.1
5.1
5.2
5.4
5.9
4.9
5.1
5.2
5.7
4.7
4.9
5.0
5.6
5.0
5.2
5.3
5.8
4.7
4.8
5.0
5.5
4.7
4.9
5.0
5.5
4.5
4.6
4.7
5.2
4.9
5.1
5.2
5.7
5.4
5.6
5.7
6.2
5.0
5.2
5.3
5.8
4.7
4.9
5.0
5.4
5.2
5.3
5.4
5.9
5.2
5.4
5.5
5.9
4.4
4.5
4.6
5.0
2.9
3.0
3.0
3.4
4.0
4.1
4.2
4.6
3.7
3.8
3.9
4.3
4.1
4.2
4.3
4.7
4.0
4.2
4.2
4.6
3.9
4.0
4.1
4.5
4.1
4.2
4.3
4.6
4.0
4.2
4.2
4.6
4.3
4.4
4.5
4.8
4.5
4.6
4.7
5.1
4.8
4.9
5.0
5.3
4.9
5.0
5.1
5.5
5.1
5.2
5.3
5.7
5.1
5.2
5.3
5.7
5.1
5.2
5.3
5.7
5.4
5.5
5.6
5.9
5.0
5.1
5.2
5.6
5.2
5.3
5.4
5.7
5.3
5.4
5.5
5.8
5.5
5.6
5.7
6.0
5.3
5.5
5.5
5.8
5.5
5.6
5.7
6.0
5.6
5.7
5.8
6.1
5.7
5.8
5.9
6.2
5.8
5.9
6.0
6.3
6.0
6.1
6.2
6.5
5.8
5.9
6.0
6.3
5.5
5.6
5.7
6.0
5.1
5.2
5.3
5.6
5.3
5.4
5.4
5.7
5.3
5.4
5.5
5.8
5.4
5.5
5.6
5.9
5.5
5.6
5.7
6.0
5.5
5.6
5.6
5.9
5.0
5.1
5.2
5.4
5.2
5.3
5.4
5.6
5.2
5.3
5.4
5.7
The dates along the top (and bottom) are those on which each
portfolio starts; those down the side are the dates to which the annual
rate of return is calculated. Thus the figure at the bottom right hand
corner - 8.9 - shows that the real return on a portfolio bought at the
end of December 2009 and held for one year to December 2010 was
8.9%. Figures in brackets indicate negative returns.
(9.6)
(2.6)
0.7
(9.4)
(2.1)
3.9
3.7
5.4
6.6
6.5
7.2
8.0
6.1
5.9
4.3
6.1
7.2
7.5
7.7
8.1
6.7
6.0
5.3
4.4
4.9
5.4
5.7
5.9
5.8
6.2
5.8
5.3
4.9
4.9
4.7
4.4
4.8
5.7
5.7
5.2
4.9
5.7
6.7
6.5
6.3
6.1
6.4
6.0
6.0
5.7
6.2
6.7
6.3
5.9
6.4
6.4
5.5
3.8
5.0
4.7
5.1
5.0
4.8
5.0
5.0
5.2
5.4
5.7
5.8
6.1
6.0
6.0
6.3
5.9
6.0
6.2
6.4
6.2
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.9
6.0
6.1
6.2
6.2
6.2
5.7
5.9
5.9
5.0
6.2
7.4
(9.4) (15.8) (34.0)
(0.1) (1.7) (6.0)
6.8
7.2
7.2
6.1
6.3
6.1
7.7
8.1
8.3
8.8
9.4
9.7
8.5
8.9
9.1
9.1
9.5
9.8
9.8 10.3 10.6
7.6
7.8
7.8
7.2
7.4
7.4
5.4
5.4
5.2
7.3
7.4
7.5
8.3
8.5
8.6
8.6
8.8
8.9
8.7
9.0
9.1
9.1
9.3
9.5
7.6
7.7
7.7
6.8
6.9
6.8
6.1
6.1
6.1
5.0
5.0
4.9
5.6
5.6
5.5
6.1
6.1
6.1
6.3
6.3
6.3
6.5
6.5
6.5
6.4
6.5
6.4
6.8
6.8
6.8
6.4
6.4
6.4
5.8
5.9
5.8
5.3
5.4
5.3
5.4
5.4
5.4
5.1
5.2
5.1
4.8
4.8
4.7
5.3
5.3
5.2
6.1
6.2
6.1
6.1
6.1
6.1
5.6
5.6
5.6
5.3
5.3
5.3
6.1
6.2
6.1
7.1
7.2
7.2
6.9
7.0
7.0
6.7
6.7
6.7
6.5
6.5
6.5
6.7
6.8
6.8
6.4
6.4
6.4
6.4
6.4
6.4
6.1
6.1
6.1
6.5
6.5
6.5
7.1
7.1
7.1
6.6
6.6
6.6
6.2
6.3
6.2
6.7
6.7
6.7
6.7
6.8
6.7
5.8
5.8
5.8
4.1
4.1
4.0
5.2
5.3
5.2
4.9
4.9
4.9
5.4
5.4
5.3
5.3
5.3
5.2
5.1
5.1
5.1
5.3
5.3
5.3
5.2
5.2
5.2
5.5
5.5
5.4
5.7
5.7
5.7
6.0
6.0
6.0
6.1
6.1
6.1
6.3
6.3
6.3
6.3
6.3
6.3
6.3
6.3
6.3
6.5
6.5
6.5
6.1
6.1
6.1
6.3
6.3
6.3
6.4
6.4
6.4
6.6
6.6
6.6
6.4
6.4
6.4
6.6
6.6
6.6
6.6
6.7
6.7
6.8
6.8
6.8
6.8
6.9
6.9
7.0
7.0
7.0
6.8
6.8
6.8
6.5
6.6
6.5
6.1
6.1
6.1
6.2
6.2
6.2
6.2
6.3
6.3
6.4
6.4
6.4
6.4
6.5
6.4
6.4
6.4
6.4
5.9
5.9
5.9
6.1
6.1
6.1
6.1
6.1
6.1
34.0
36.6
24.3
22.6
21.5
18.7
18.1
18.0
13.9
12.8
9.8
11.9
12.8
12.9
12.8
13.0
10.9
9.7
8.7
7.4
7.9
8.4
8.5
8.6
8.5
8.8
8.3
7.6
7.0
7.0
6.7
6.3
6.7
7.6
7.6
7.0
6.6
7.5
8.5
8.3
8.0
7.7
8.0
7.5
7.5
7.2
7.6
8.2
7.6
7.2
7.7
7.7
6.7
4.9
6.1
5.8
6.2
6.1
5.9
6.1
6.0
6.2
6.5
6.7
6.9
7.1
7.0
7.0
7.3
6.9
7.0
7.1
7.3
7.1
7.3
7.3
7.5
7.5
7.7
7.5
7.2
6.7
6.8
6.9
7.0
7.0
7.0
6.4
6.6
6.7
39.3
19.7
19.0
18.6
15.8
15.6
15.9
11.6
10.6
7.6
10.1
11.2
11.4
11.4
11.7
9.6
8.5
7.5
6.1
6.8
7.3
7.5
7.7
7.5
7.9
7.4
6.8
6.1
6.2
5.9
5.5
6.0
6.9
6.9
6.3
5.9
6.8
7.9
7.7
7.4
7.2
7.4
7.0
7.0
6.6
7.1
7.7
7.2
6.8
7.3
7.3
6.2
4.4
5.7
5.3
5.8
5.7
5.5
5.7
5.6
5.8
6.1
6.4
6.5
6.7
6.7
6.6
6.9
6.5
6.6
6.8
7.0
6.8
6.9
7.0
7.2
7.2
7.4
7.2
6.9
6.4
6.5
6.6
6.7
6.8
6.7
6.2
6.4
6.4
2.8
10.0
12.4
10.6
11.4
12.4
8.1
7.5
4.6
7.5
9.0
9.3
9.5
9.9
7.8
6.8
5.9
4.6
5.3
5.9
6.2
6.4
6.3
6.8
6.3
5.7
5.1
5.2
4.9
4.5
5.0
6.0
6.0
5.4
5.1
6.1
7.1
7.0
6.7
6.5
6.7
6.3
6.3
6.0
6.5
7.1
6.6
6.2
6.7
6.7
5.7
3.8
5.1
4.8
5.2
5.1
5.0
5.2
5.1
5.3
5.6
5.9
6.0
6.3
6.2
6.2
6.5
6.1
6.2
6.4
6.6
6.4
6.5
6.6
6.8
6.8
7.0
6.8
6.5
6.1
6.2
6.2
6.4
6.4
6.4
5.8
6.0
6.1
17.6
17.4
13.3
13.7
14.4
9.0
8.2
4.8
8.1
9.6
9.9
10.1
10.5
8.2
7.0
6.0
4.7
5.4
6.1
6.4
6.6
6.5
6.9
6.4
5.8
5.2
5.3
4.9
4.5
5.1
6.2
6.1
5.5
5.2
6.2
7.3
7.1
6.8
6.6
6.8
6.4
6.4
6.0
6.6
7.2
6.6
6.2
6.8
6.8
5.7
3.8
5.1
4.8
5.3
5.2
5.0
5.2
5.1
5.4
5.6
6.0
6.1
6.3
6.3
6.3
6.5
6.1
6.3
6.4
6.7
6.4
6.6
6.7
6.8
6.9
7.1
6.9
6.6
6.1
6.2
6.3
6.4
6.5
6.4
5.9
6.1
6.1
Each figure on the bottom line of the table shows the average annual
return up to the end of December 2010 from the year shown below the
figure. The first figure is 5.1, showing that the average annual rate of
return over the whole period since 1899 has been 5.1%.
17.3
11.2
12.4
13.6
7.4
6.7
3.1
6.9
8.8
9.2
9.4
9.9
7.5
6.3
5.3
3.9
4.7
5.4
5.8
6.1
6.0
6.5
5.9
5.3
4.7
4.8
4.5
4.1
4.7
5.8
5.8
5.2
4.8
5.8
7.0
6.8
6.5
6.3
6.6
6.1
6.1
5.8
6.3
7.0
6.4
6.0
6.5
6.6
5.5
3.6
4.9
4.6
5.1
5.0
4.8
5.0
4.9
5.2
5.5
5.8
5.9
6.1
6.1
6.1
6.4
6.0
6.1
6.3
6.5
6.3
6.5
6.5
6.7
6.8
6.9
6.7
6.4
6.0
6.1
6.1
6.3
6.3
6.3
5.7
6.0
6.0
5.5
10.0
12.4
5.1
4.7
0.9
5.5
7.8
8.3
8.7
9.3
6.7
5.5
4.5
3.1
4.0
4.8
5.2
5.5
5.5
6.0
5.5
4.8
4.2
4.3
4.0
3.6
4.3
5.4
5.4
4.8
4.5
5.5
6.7
6.5
6.2
6.0
6.3
5.8
5.9
5.5
6.1
6.8
6.2
5.8
6.3
6.4
5.3
3.3
4.7
4.4
4.8
4.7
4.6
4.8
4.7
5.0
5.3
5.6
5.7
6.0
6.0
5.9
6.2
5.8
5.9
6.1
6.4
6.1
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.8
6.0
6.0
6.1
6.2
6.1
5.6
5.8
5.9
14.8
16.0
4.9
4.5
(0.0)
5.5
8.1
8.7
9.0
9.7
6.8
5.5
4.4
2.9
3.9
4.7
5.2
5.5
5.5
6.0
5.5
4.8
4.2
4.3
4.0
3.6
4.2
5.4
5.4
4.8
4.4
5.5
6.7
6.5
6.3
6.0
6.3
5.9
5.9
5.5
6.1
6.8
6.2
5.8
6.3
6.4
5.3
3.3
4.7
4.3
4.8
4.7
4.5
4.8
4.7
5.0
5.3
5.6
5.7
6.0
6.0
5.9
6.2
5.8
6.0
6.1
6.4
6.1
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.8
6.0
6.0
6.2
6.2
6.2
5.6
5.8
5.9
17.3
0.3 (14.1)
1.3 (5.9)
(3.4) (9.5)
3.8
0.7
7.0
5.1
7.8
6.4
8.3
7.1
9.1
8.2
6.1
4.9
4.7
3.6
3.6
2.5
2.0
0.8
3.2
2.2
4.1
3.2
4.6
3.8
5.0
4.3
5.0
4.3
5.6
5.0
5.0
4.4
4.3
3.7
3.7
3.1
3.9
3.3
3.6
3.0
3.1
2.6
3.8
3.3
5.1
4.6
5.1
4.6
4.4
4.0
4.1
3.7
5.2
4.8
6.5
6.2
6.3
6.0
6.0
5.7
5.8
5.5
6.1
5.8
5.6
5.3
5.7
5.4
5.3
5.0
5.9
5.6
6.6
6.3
6.0
5.7
5.6
5.3
6.2
5.9
6.2
6.0
5.1
4.8
3.0
2.8
4.5
4.2
4.1
3.9
4.6
4.4
4.5
4.3
4.4
4.1
4.6
4.3
4.5
4.3
4.8
4.6
5.1
4.9
5.4
5.2
5.6
5.4
5.8
5.7
5.8
5.6
5.8
5.6
6.1
5.9
5.7
5.5
5.8
5.7
6.0
5.8
6.3
6.1
6.0
5.9
6.2
6.0
6.3
6.1
6.5
6.3
6.5
6.4
6.7
6.6
6.5
6.4
6.2
6.0
5.7
5.6
5.9
5.7
5.9
5.7
6.0
5.9
6.1
6.0
6.0
5.9
5.5
5.4
5.7
5.6
5.8
5.6
3.1
(7.0) (16.2)
6.1
7.7
10.5 13.1
11.0 13.1
11.1 12.8
11.8 13.3
7.6
8.2
5.7
6.1
4.3
4.4
2.3
2.3
3.6
3.7
4.7
4.8
5.2
5.4
5.6
5.8
5.6
5.7
6.2
6.4
5.5
5.7
4.8
4.9
4.0
4.1
4.2
4.2
3.9
3.9
3.4
3.4
4.1
4.2
5.5
5.6
5.4
5.5
4.8
4.8
4.4
4.4
5.6
5.7
6.9
7.1
6.7
6.8
6.4
6.5
6.1
6.2
6.4
6.5
5.9
6.0
6.0
6.0
5.6
5.6
6.2
6.3
6.9
7.0
6.3
6.4
5.8
5.9
6.4
6.5
6.5
6.6
5.3
5.3
3.2
3.2
4.7
4.7
4.3
4.3
4.8
4.8
4.7
4.7
4.5
4.5
4.7
4.8
4.7
4.7
5.0
5.0
5.3
5.3
5.6
5.7
5.8
5.8
6.0
6.1
6.0
6.1
6.0
6.0
6.3
6.3
5.9
5.9
6.0
6.1
6.2
6.2
6.4
6.5
6.2
6.2
6.4
6.4
6.5
6.5
6.7
6.7
6.7
6.8
6.9
7.0
6.7
6.7
6.4
6.4
5.9
5.9
6.0
6.0
6.0
6.1
6.2
6.2
6.3
6.3
6.2
6.2
5.6
5.7
5.9
5.9
5.9
5.9
38.3
31.3
24.9
21.5
20.3
12.9
9.7
7.3
4.5
5.9
7.0
7.4
7.7
7.5
8.1
7.2
6.3
5.3
5.5
5.0
4.4
5.2
6.6
6.6
5.8
5.3
6.6
8.0
7.7
7.3
7.0
7.3
6.8
6.8
6.3
7.0
7.7
7.0
6.5
7.2
7.2
5.9
3.7
5.2
4.8
5.4
5.2
5.0
5.3
5.2
5.5
5.8
6.1
6.3
6.5
6.5
6.5
6.8
6.3
6.5
6.6
6.9
6.6
6.8
6.9
7.1
7.1
7.4
7.1
6.8
6.2
6.4
6.4
6.6
6.6
6.6
6.0
6.2
6.2
24.8
18.7
16.3
16.2
8.4
5.5
3.5
0.9
2.8
4.3
5.0
5.5
5.4
6.2
5.4
4.5
3.7
3.9
3.5
3.0
3.9
5.4
5.4
4.6
4.2
5.5
7.0
6.7
6.4
6.1
6.5
5.9
5.9
5.5
6.2
7.0
6.3
5.8
6.5
6.5
5.2
3.0
4.5
4.2
4.7
4.6
4.4
4.7
4.6
4.9
5.2
5.6
5.7
6.0
6.0
6.0
6.3
5.8
6.0
6.2
6.5
6.2
6.4
6.5
6.7
6.7
6.9
6.7
6.4
5.8
6.0
6.0
6.2
6.3
6.2
5.6
5.9
5.9
13.0
12.3
13.5
4.7
2.1
0.3
(2.1)
0.4
2.2
3.2
3.9
4.0
4.9
4.2
3.3
2.5
2.8
2.4
2.0
2.9
4.5
4.6
3.8
3.4
4.8
6.4
6.1
5.8
5.5
5.9
5.4
5.4
5.0
5.7
6.5
5.8
5.3
6.0
6.1
4.8
2.5
4.1
3.7
4.3
4.2
4.0
4.3
4.2
4.5
4.9
5.2
5.4
5.7
5.7
5.7
6.0
5.5
5.7
5.9
6.2
5.9
6.1
6.2
6.4
6.5
6.7
6.5
6.1
5.6
5.8
5.8
6.0
6.0
6.0
5.4
5.6
5.7
11.6
13.7
2.1
(0.5)
(2.0)
(4.4)
(1.3)
1.0
2.1
3.0
3.2
4.3
3.5
2.6
1.8
2.2
1.8
1.4
2.4
4.1
4.2
3.4
3.0
4.5
6.1
5.9
5.6
5.3
5.7
5.1
5.2
4.7
5.5
6.3
5.6
5.1
5.8
5.9
4.6
2.2
3.9
3.5
4.1
4.0
3.8
4.1
4.0
4.4
4.7
5.1
5.3
5.6
5.6
5.5
5.9
5.4
5.6
5.8
6.1
5.8
6.0
6.1
6.3
6.4
6.6
6.4
6.0
5.5
5.6
5.7
5.9
5.9
5.9
5.3
5.5
5.6
15.9
(2.4) (17.7)
(4.2) (13.0) (7.9)
(5.2) (11.3) (7.9) (7.9)
(7.3) (12.3) (10.4) (11.7) (15.3)
(3.3) (6.8) (3.8) (2.4)
0.5
(0.5) (3.0)
0.3
2.4
6.1
1.0 (1.0)
2.2
4.3
7.6
2.1
0.5
3.4
5.4
8.3
2.4
1.0
3.6
5.3
7.7
3.6
2.5
5.0
6.8
9.0
2.9
1.8
4.0
5.4
7.1
2.0
0.9
2.8
3.9
5.3
1.1
0.1
1.7
2.7
3.8
1.6
0.6
2.2
3.1
4.1
1.3
0.3
1.8
2.6
3.5
0.8 (0.1)
1.2
1.9
2.7
1.9
1.2
2.5
3.2
4.0
3.8
3.1
4.5
5.3
6.3
3.8
3.2
4.5
5.3
6.2
3.0
2.4
3.6
4.3
5.0
2.6
2.0
3.1
3.7
4.4
4.2
3.7
4.8
5.5
6.2
5.9
5.5
6.7
7.4
8.3
5.7
5.2
6.4
7.1
7.9
5.3
4.9
6.0
6.6
7.4
5.0
4.6
5.7
6.3
6.9
5.5
5.1
6.1
6.7
7.3
4.9
4.5
5.5
6.0
6.6
5.0
4.6
5.5
6.0
6.6
4.5
4.2
5.0
5.5
6.0
5.3
4.9
5.8
6.3
6.9
6.2
5.9
6.8
7.3
7.9
5.5
5.2
6.0
6.4
7.0
5.0
4.7
5.4
5.9
6.3
5.7
5.4
6.2
6.6
7.1
5.8
5.5
6.2
6.7
7.2
4.4
4.1
4.8
5.2
5.6
2.0
1.6
2.2
2.5
2.8
3.7
3.4
4.0
4.4
4.8
3.3
3.0
3.6
4.0
4.3
3.9
3.7
4.3
4.6
5.0
3.9
3.6
4.2
4.5
4.8
3.6
3.4
3.9
4.2
4.6
3.9
3.7
4.2
4.5
4.9
3.9
3.6
4.2
4.5
4.8
4.2
4.0
4.5
4.8
5.1
4.6
4.3
4.9
5.2
5.5
5.0
4.8
5.3
5.6
5.9
5.1
4.9
5.5
5.8
6.1
5.5
5.3
5.8
6.1
6.4
5.4
5.2
5.8
6.1
6.4
5.4
5.2
5.7
6.0
6.3
5.8
5.6
6.1
6.4
6.7
5.3
5.1
5.6
5.9
6.2
5.5
5.3
5.8
6.1
6.3
5.7
5.5
6.0
6.2
6.5
6.0
5.8
6.3
6.6
6.8
5.7
5.5
6.0
6.3
6.5
5.9
5.8
6.2
6.5
6.8
6.0
5.9
6.3
6.6
6.9
6.2
6.1
6.5
6.8
7.1
6.3
6.2
6.6
6.9
7.1
6.5
6.4
6.8
7.1
7.4
6.3
6.1
6.6
6.8
7.1
5.9
5.8
6.2
6.4
6.7
5.4
5.3
5.7
5.9
6.1
5.6
5.4
5.8
6.0
6.3
5.6
5.5
5.9
6.1
6.3
5.8
5.6
6.0
6.3
6.5
5.9
5.7
6.1
6.3
6.6
5.8
5.7
6.0
6.3
6.5
5.2
5.1
5.4
5.6
5.8
5.4
5.3
5.7
5.9
6.1
5.5
5.4
5.7
5.9
6.1
The top figure in each column is the rate of return in the first year, so
that reading diagonally down the table gives the real rate of return in
each year since 1899. The table can be used to see the rate of return
over any period; thus a purchase made at the end of 1900 would have
lost 3.5% of its value in one year (allowing for reinvestment of income)
but, over the first five years (up to the end of 1905), would have given
an average annual real return of 3.5%.
19.2
18.8
16.5
15.2
13.0
13.7
10.8
8.2
6.2
6.3
5.4
4.4
5.7
8.0
7.8
6.5
5.7
7.6
9.7
9.2
8.6
8.1
8.5
7.6
7.6
7.0
7.8
8.8
7.8
7.2
7.9
7.9
6.3
3.4
5.4
4.9
5.6
5.4
5.1
5.4
5.3
5.7
6.0
6.5
6.6
6.9
6.9
6.8
7.2
6.6
6.8
7.0
7.3
7.0
7.2
7.3
7.5
7.6
7.8
7.5
7.1
6.5
6.7
6.7
6.9
6.9
6.8
6.2
6.4
6.5
18.4
15.2
13.9
11.6
12.7
9.5
6.7
4.6
4.9
4.1
3.1
4.7
7.2
7.0
5.7
4.9
6.9
9.2
8.7
8.1
7.6
8.0
7.2
7.1
6.5
7.4
8.4
7.4
6.8
7.6
7.6
5.9
3.0
5.0
4.5
5.2
5.1
4.8
5.1
5.0
5.4
5.8
6.2
6.3
6.7
6.6
6.6
7.0
6.4
6.6
6.8
7.1
6.8
7.0
7.1
7.3
7.4
7.6
7.3
6.9
6.3
6.5
6.5
6.7
6.8
6.7
6.0
6.3
6.3
12.1
11.7
9.4
11.3
7.8
4.9
2.8
3.4
2.6
1.7
3.5
6.3
6.2
4.8
4.1
6.3
8.6
8.1
7.6
7.0
7.5
6.7
6.7
6.0
6.9
8.1
7.1
6.4
7.2
7.3
5.5
2.5
4.6
4.1
4.9
4.7
4.4
4.8
4.7
5.1
5.5
5.9
6.1
6.4
6.4
6.4
6.7
6.2
6.4
6.6
6.9
6.6
6.8
6.9
7.1
7.2
7.4
7.1
6.7
6.1
6.3
6.3
6.5
6.6
6.5
5.8
6.1
6.1
11.3
8.0
11.0
6.7
3.5
1.3
2.2
1.5
0.6
2.7
5.8
5.7
4.3
3.5
5.9
8.4
7.9
7.3
6.8
7.3
6.4
6.4
5.8
6.7
7.9
6.9
6.2
7.1
7.1
5.3
2.2
4.4
3.9
4.6
4.5
4.2
4.6
4.5
4.9
5.3
5.8
5.9
6.3
6.3
6.2
6.6
6.0
6.2
6.4
6.8
6.5
6.7
6.8
7.0
7.1
7.3
7.0
6.6
6.0
6.2
6.2
6.4
6.5
6.4
5.7
6.0
6.0
4.8
10.9
5.2
1.7
(0.6)
0.7
0.2
(0.6)
1.7
5.3
5.2
3.7
3.0
5.5
8.2
7.7
7.1
6.5
7.1
6.2
6.2
5.5
6.5
7.8
6.7
6.0
6.9
7.0
5.1
2.0
4.2
3.7
4.4
4.3
4.0
4.4
4.3
4.7
5.2
5.6
5.8
6.2
6.2
6.1
6.5
5.9
6.1
6.3
6.7
6.4
6.6
6.7
6.9
7.0
7.3
7.0
6.6
5.9
6.1
6.1
6.3
6.4
6.3
5.6
5.9
6.0
17.3
5.4
0.6
(1.9)
(0.1)
(0.6)
(1.4)
1.4
5.3
5.3
3.6
2.8
5.6
8.5
7.9
7.2
6.6
7.2
6.3
6.3
5.6
6.6
7.9
6.8
6.0
7.0
7.0
5.1
1.9
4.2
3.6
4.4
4.3
4.0
4.4
4.3
4.7
5.2
5.6
5.8
6.2
6.2
6.1
6.6
6.0
6.2
6.4
6.7
6.4
6.6
6.8
7.0
7.1
7.3
7.0
6.6
5.9
6.1
6.2
6.4
6.5
6.4
5.6
5.9
6.0
(5.3)
(6.8)
(7.5)
(4.0)
(3.8)
(4.2)
(0.7)
3.9
4.0
2.3
1.6
4.6
7.8
7.3
6.6
6.0
6.7
5.7
5.7
5.0
6.1
7.5
6.3
5.6
6.6
6.7
4.7
1.3
3.7
3.2
4.0
3.9
3.6
4.0
3.9
4.4
4.9
5.4
5.6
6.0
5.9
5.9
6.3
5.7
5.9
6.1
6.5
6.2
6.4
6.6
6.8
6.9
7.1
6.8
6.4
5.8
5.9
6.0
6.2
6.3
6.2
5.5
5.8
5.8
(8.3)
(8.6)
(3.5)
(3.4)
(4.0)
0.1
5.3
5.2
3.2
2.3
5.6
9.0
8.3
7.5
6.8
7.5
6.4
6.4
5.6
6.7
8.1
6.9
6.1
7.1
7.2
5.1
1.6
4.1
3.5
4.4
4.2
3.9
4.3
4.2
4.7
5.1
5.7
5.9
6.3
6.2
6.2
6.6
6.0
6.2
6.4
6.8
6.4
6.7
6.8
7.1
7.1
7.4
7.1
6.6
6.0
6.2
6.2
6.4
6.5
6.4
5.7
6.0
6.0
(8.9)
(1.1)
(1.8)
(2.9)
1.8
7.7
7.3
4.7
3.5
7.1
10.7
9.8
8.8
8.0
8.6
7.3
7.3
6.4
7.6
9.0
7.7
6.8
7.9
7.9
5.7
2.0
4.6
4.0
4.8
4.7
4.4
4.7
4.6
5.1
5.6
6.1
6.3
6.7
6.6
6.6
7.0
6.3
6.6
6.8
7.2
6.8
7.0
7.2
7.4
7.5
7.7
7.4
6.9
6.2
6.4
6.5
6.7
6.8
6.7
5.9
6.2
6.2
7.4
2.0
(0.8)
4.7
11.4
10.3
6.8
5.2
9.0
12.9
11.7
10.4
9.4
10.0
8.5
8.4
7.4
8.6
10.1
8.6
7.6
8.7
8.7
6.4
2.5
5.1
4.5
5.4
5.2
4.8
5.2
5.1
5.6
6.0
6.5
6.7
7.1
7.1
7.0
7.4
6.8
7.0
7.2
7.6
7.2
7.4
7.5
7.8
7.8
8.1
7.7
7.3
6.6
6.7
6.8
7.0
7.1
7.0
6.2
6.5
6.5
(3.1)
(4.6)
3.8
12.4
10.9
6.7
4.9
9.2
13.6
12.1
10.7
9.6
10.2
8.6
8.5
7.4
8.7
10.2
8.6
7.6
8.7
8.7
6.3
2.3
5.0
4.4
5.3
5.1
4.7
5.1
5.0
5.5
6.0
6.5
6.7
7.1
7.1
7.0
7.4
6.7
6.9
7.2
7.6
7.2
7.4
7.5
7.8
7.8
8.1
7.7
7.3
6.5
6.7
6.8
7.0
7.1
6.9
6.2
6.5
6.5
(6.1)
7.4
18.2
14.7
8.8
6.3
11.1
15.8
14.0
12.2
10.8
11.3
9.6
9.3
8.1
9.5
11.0
9.3
8.2
9.4
9.3
6.8
2.5
5.4
4.7
5.6
5.4
5.0
5.4
5.3
5.8
6.3
6.8
7.0
7.4
7.4
7.3
7.7
7.0
7.2
7.4
7.8
7.4
7.7
7.8
8.0
8.1
8.3
8.0
7.5
6.7
6.9
7.0
7.2
7.2
7.1
6.3
6.6
6.7
22.9
32.6
22.6
12.9
9.0
14.3
19.4
16.7
14.4
12.6
13.1
11.0
10.6
9.2
10.6
12.2
10.3
9.0
10.3
10.1
7.4
2.9
5.9
5.2
6.1
5.9
5.5
5.9
5.7
6.2
6.7
7.2
7.4
7.9
7.8
7.7
8.1
7.4
7.6
7.8
8.2
7.8
8.0
8.1
8.4
8.4
8.7
8.3
7.8
7.0
7.2
7.2
7.4
7.5
7.4
6.6
6.9
6.9
42.9
22.4
9.8
5.7
12.6
18.8
15.9
13.4
11.6
12.1
10.0
9.7
8.3
9.7
11.5
9.6
8.3
9.6
9.5
6.7
2.0
5.2
4.4
5.5
5.3
4.9
5.3
5.1
5.7
6.2
6.8
7.0
7.4
7.4
7.3
7.7
7.0
7.2
7.4
7.8
7.4
7.7
7.8
8.0
8.1
8.4
8.0
7.5
6.7
6.9
6.9
7.2
7.2
7.1
6.3
6.6
6.6
4.8
(3.8) (11.7)
(4.4) (8.7)
6.1
6.6
14.5 17.0
11.9 13.4
9.7 10.6
8.1
8.6
9.2
9.7
7.1
7.4
7.1
7.3
5.8
5.9
7.5
7.8
9.6
9.9
7.7
7.9
6.4
6.5
7.9
8.1
7.9
8.1
5.1
5.1
0.3
0.1
3.7
3.6
3.0
2.9
4.1
4.1
3.9
3.9
3.6
3.5
4.1
4.0
4.0
3.9
4.5
4.5
5.1
5.1
5.7
5.8
6.0
6.0
6.5
6.5
6.4
6.5
6.4
6.4
6.9
6.9
6.1
6.2
6.4
6.4
6.6
6.7
7.1
7.1
6.6
6.7
6.9
7.0
7.1
7.1
7.3
7.4
7.4
7.5
7.7
7.8
7.3
7.4
6.8
6.9
6.1
6.1
6.3
6.3
6.3
6.4
6.6
6.6
6.6
6.7
6.5
6.6
5.7
5.7
6.0
6.1
6.1
6.1
(5.5)
17.1
28.6
20.7
15.7
12.5
13.2
10.0
9.6
7.8
9.7
12.0
9.5
8.0
9.6
9.5
6.2
0.8
4.5
3.7
4.9
4.7
4.2
4.7
4.6
5.2
5.8
6.5
6.7
7.2
7.1
7.0
7.6
6.7
7.0
7.2
7.7
7.2
7.5
7.7
7.9
8.0
8.3
7.9
7.3
6.5
6.7
6.8
7.0
7.1
7.0
6.1
6.4
6.5
45.2
49.9
31.0
21.6
16.4
16.6
12.4
11.7
9.4
11.4
13.7
10.9
9.1
10.7
10.5
6.9
1.2
5.1
4.2
5.4
5.2
4.7
5.2
5.0
5.7
6.3
6.9
7.2
7.7
7.6
7.5
8.0
7.1
7.4
7.6
8.1
7.6
7.9
8.0
8.3
8.3
8.6
8.2
7.6
6.8
7.0
7.0
7.3
7.4
7.2
6.3
6.7
6.7
54.8
24.4
14.7
10.2
11.6
7.8
7.6
5.6
8.2
11.0
8.2
6.5
8.4
8.4
4.8
(1.1)
3.1
2.3
3.7
3.5
3.1
3.7
3.6
4.3
4.9
5.7
6.0
6.5
6.5
6.4
7.0
6.1
6.4
6.7
7.2
6.7
7.0
7.2
7.5
7.5
7.9
7.4
6.9
6.1
6.3
6.3
6.6
6.7
6.6
5.7
6.0
6.1
(0.1)
(1.3)
(1.6)
2.9
0.2
1.3
(0.0)
3.4
6.9
4.4
3.0
5.3
5.5
1.9
(4.0)
0.5
(0.2)
1.4
1.3
1.0
1.7
1.7
2.5
3.3
4.1
4.4
5.1
5.1
5.0
5.7
4.8
5.2
5.5
6.0
5.6
5.9
6.1
6.4
6.5
6.9
6.5
6.0
5.1
5.4
5.5
5.7
5.9
5.7
4.8
5.2
5.3
(2.5)
(2.4)
3.9
0.3
1.5
(0.0)
3.9
7.8
4.9
3.3
5.8
6.0
2.1
(4.2)
0.6
(0.2)
1.5
1.4
1.1
1.8
1.8
2.6
3.4
4.3
4.6
5.3
5.2
5.2
5.9
5.0
5.3
5.7
6.2
5.7
6.1
6.3
6.6
6.7
7.1
6.7
6.1
5.3
5.5
5.6
5.9
6.0
5.9
5.0
5.3
5.4
(2.2)
7.3
1.3
2.6
0.5
5.0
9.4
5.9
3.9
6.6
6.8
2.4
(4.4)
0.8
(0.0)
1.7
1.6
1.3
2.0
2.0
2.9
3.7
4.6
4.9
5.6
5.6
5.5
6.2
5.3
5.6
5.9
6.5
6.0
6.4
6.6
6.9
7.0
7.4
6.9
6.3
5.5
5.7
5.8
6.1
6.2
6.1
5.1
5.5
5.6
17.7
3.0
4.2
1.2
6.6
11.5
7.1
4.7
7.7
7.7
2.9
(4.5)
1.0
0.1
2.0
1.9
1.5
2.3
2.2
3.1
4.0
4.9
5.3
5.9
5.9
5.8
6.5
5.5
5.9
6.2
6.8
6.3
6.6
6.8
7.2
7.3
7.6
7.2
6.6
5.7
5.9
6.0
6.3
6.4
6.3
5.3
5.7
5.8
(9.8)
(1.9)
(3.8)
3.9
10.3
5.4
3.0
6.5
6.7
1.5
(6.3)
(0.2)
(1.1)
1.0
0.9
0.5
1.4
1.4
2.4
3.3
4.3
4.7
5.4
5.4
5.4
6.1
5.1
5.5
5.9
6.4
5.9
6.3
6.5
6.9
7.0
7.4
6.9
6.3
5.4
5.6
5.7
6.0
6.1
6.0
5.0
5.4
5.5
6.6
(0.7)
9.0
16.0
8.8
5.3
9.0
8.9
2.8
(6.0)
0.7
(0.4)
1.8
1.7
1.3
2.2
2.1
3.2
4.1
5.1
5.5
6.2
6.1
6.1
6.8
5.7
6.1
6.5
7.1
6.5
6.9
7.1
7.4
7.5
7.9
7.4
6.8
5.8
6.1
6.1
6.4
6.5
6.4
5.4
5.8
5.9
(7.4)
10.2
19.3
9.3
5.0
9.4
9.2
2.4
(7.3)
0.1
(1.0)
1.5
1.4
0.9
1.9
1.9
3.0
3.9
5.0
5.4
6.2
6.1
6.0
6.8
5.7
6.1
6.5
7.1
6.5
6.9
7.1
7.4
7.5
7.9
7.4
6.8
5.8
6.0
6.1
6.4
6.5
6.4
5.4
5.8
5.9
31.1
35.4 39.8
15.5
8.5 (15.9)
8.4
1.7 (13.2) (10.5)
13.2
9.1
0.4
9.7 34.4
12.3
8.9
2.3
9.1 20.5
8.1
3.9 (0.1) (6.6) (4.1) (1.9) (16.2) (35.0)
(7.3) (11.8) (18.3) (18.7) (20.7) (33.5) (47.8) (58.1)
1.0 (2.3) (7.2) (5.6) (4.6) (12.4) (18.4) (8.6)
(0.3) (3.3) (7.7) (6.4) (5.7) (12.2) (16.6) (9.4)
2.3 (0.2) (3.9) (2.3) (1.0) (5.9) (8.5) (0.4)
2.1 (0.2) (3.5) (2.0) (0.9) (5.1) (7.1) (0.3)
1.6 (0.6) (3.6) (2.3) (1.3) (5.1) (6.8) (1.1)
2.6
0.7 (2.0) (0.7)
0.4 (2.8) (4.1)
1.4
2.5
0.7 (1.8) (0.5)
0.5 (2.4) (3.5)
1.4
3.6
2.0 (0.2)
1.1
2.1 (0.4) (1.2)
3.5
4.6
3.2
1.1
2.5
3.5
1.3
0.7
5.2
5.7
4.4
2.5
3.9
5.0
3.0
2.6
6.9
6.1
4.9
3.1
4.5
5.5
3.7
3.4
7.5
6.9
5.8
4.1
5.4
6.5
4.9
4.7
8.6
6.8
5.7
4.2
5.4
6.4
4.9
4.7
8.3
6.7
5.7
4.2
5.4
6.3
4.9
4.7
8.0
7.5
6.5
5.1
6.3
7.3
5.9
5.8
9.1
6.3
5.3
4.0
5.0
5.9
4.6
4.4
7.3
6.7
5.7
4.5
5.5
6.3
5.1
4.9
7.8
7.0
6.2
5.0
6.0
6.8
5.6
5.5
8.2
7.6
6.8
5.7
6.7
7.5
6.4
6.4
9.0
7.0
6.2
5.1
6.0
6.8
5.7
5.6
8.1
7.4
6.7
5.6
6.5
7.3
6.3
6.2
8.6
7.6
6.9
5.9
6.8
7.5
6.5
6.5
8.8
8.0
7.3
6.3
7.2
7.9
7.0
6.9
9.2
8.0
7.4
6.4
7.3
8.0
7.1
7.1
9.2
8.4
7.8
6.9
7.7
8.4
7.6
7.6
9.7
7.9
7.3
6.4
7.2
7.8
7.0
7.0
9.0
7.2
6.6
5.7
6.5
7.0
6.2
6.2
8.1
6.2
5.5
4.7
5.3
5.9
5.1
5.0
6.7
6.4
5.8
5.0
5.7
6.2
5.4
5.3
7.0
6.5
5.9
5.1
5.8
6.3
5.5
5.4
7.1
6.8
6.2
5.4
6.1
6.6
5.9
5.8
7.5
6.9
6.4
5.6
6.2
6.8
6.1
6.0
7.6
6.8
6.2
5.5
6.1
6.6
5.9
5.8
7.4
5.7
5.1
4.4
5.0
5.4
4.7
4.6
6.1
6.1
5.6
4.9
5.4
5.9
5.2
5.1
6.6
6.2
5.7
5.0
5.5
6.0
5.3
5.2
6.6
99.6
33.2 (11.1)
33.0
8.5
23.9
5.7
17.5
2.9
17.4
5.6
15.0
4.9
15.8
7.2
16.5
9.0
17.4 10.7
17.1 11.0
17.5 12.0
16.5 11.4
15.6 10.9
16.3 11.9
13.8
9.6
13.9 10.0
14.1 10.4
14.6 11.2
13.3 10.0
13.6 10.5
13.6 10.6
13.8 11.0
13.7 10.9
14.0 11.4
13.0 10.5
11.9
9.4
10.3
8.0
10.6
8.3
10.5
8.3
10.8
8.6
10.8
8.7
10.5
8.5
9.0
7.0
9.4
7.5
9.4
7.6
32.5
15.2
8.1
10.3
8.4
10.6
12.2
13.8
13.8
14.6
13.7
12.9
13.9
11.3
11.6
11.9
12.6
11.3
11.7
11.8
12.1
12.1
12.5
11.5
10.4
8.8
9.1
9.0
9.4
9.4
9.2
7.6
8.1
8.2
0.2
(2.4)
3.7
3.1
6.6
9.1
11.3
11.6
12.8
12.0
11.3
12.4
9.8
10.2
10.6
11.5
10.2
10.7
10.8
11.2
11.2
11.6
10.7
9.5
7.9
8.2
8.3
8.6
8.7
8.5
6.9
7.5
7.5
(4.9)
5.5
4.1
8.3
11.0
13.3
13.4
14.5
13.4
12.4
13.6
10.6
11.0
11.4
12.3
10.8
11.3
11.4
11.8
11.8
12.2
11.2
9.9
8.2
8.6
8.6
8.9
9.0
8.7
7.1
7.7
7.7
17.1
8.9
13.1
15.3
17.4
16.7
17.6
15.9
14.6
15.6
12.2
12.4
12.8
13.6
12.0
12.4
12.5
12.8
12.7
13.1
12.0
10.7
8.8
9.2
9.2
9.5
9.6
9.3
7.6
8.1
8.2
1.3
11.1
14.7
17.4
16.7
17.7
15.7
14.2
15.5
11.7
12.0
12.4
13.4
11.6
12.1
12.2
12.6
12.5
12.9
11.8
10.4
8.5
8.8
8.8
9.2
9.3
9.0
7.3
7.9
7.9
21.9
22.1
23.3
20.8
21.2
18.3
16.2
17.4
12.9
13.2
13.5
14.4
12.5
12.9
12.9
13.3
13.2
13.6
12.3
10.9
8.8
9.2
9.2
9.6
9.6
9.3
7.5
8.1
8.1
22.3
24.0
20.5
21.0
17.6
15.3
16.7
11.8
12.2
12.7
13.8
11.7
12.3
12.3
12.8
12.6
13.2
11.8
10.3
8.2
8.6
8.6
9.1
9.2
8.8
7.0
7.6
7.7
25.8
19.6
20.6
16.5
13.9
15.8
10.4
11.0
11.7
12.9
10.8
11.5
11.6
12.1
12.0
12.6
11.2
9.7
7.5
8.0
8.0
8.5
8.6
8.3
6.4
7.1
7.2
13.7
18.1
13.5
11.2
13.9
8.0
9.1
10.0
11.6
9.4
10.2
10.5
11.1
11.1
11.8
10.4
8.8
6.6
7.1
7.2
7.7
7.9
7.6
5.7
6.4
6.5
22.7
13.4
10.3
14.0
6.9
8.3
9.5
11.3
8.9
9.9
10.2
10.9
10.9
11.6
10.2
8.5
6.2
6.8
6.9
7.4
7.6
7.3
5.3
6.1
6.2
4.8
4.6
11.2
3.3
5.6
7.4
9.8
7.3
8.6
9.0
9.9
10.0
10.8
9.3
7.6
5.2
5.9
6.0
6.7
6.9
6.6
4.6
5.4
5.6
4.4
14.6
2.8
5.9
8.0
10.7
7.7
9.1
9.5
10.4
10.5
11.3
9.7
7.8
5.3
6.0
6.1
6.8
7.0
6.7
4.6
5.5
5.6
25.8
2.0 (17.4)
6.4 (2.2)
8.9
3.7
11.9
8.7
8.2
5.0
9.7
7.3
10.1
8.1
11.1
9.4
11.1
9.5
12.0 10.7
10.1
8.8
8.1
6.7
5.3
3.9
6.1
4.8
6.2
5.0
6.9
5.9
7.2
6.2
6.9
5.9
4.6
3.6
5.5
4.6
5.7
4.8
15.7
16.2
19.1
11.5
13.0
13.0
13.9
13.5
14.4
11.8
9.2
5.9
6.7
6.9
7.6
7.9
7.4
4.9
5.9
6.0
16.8
20.9
10.1
12.3
12.5
13.6
13.2
14.2
11.4
8.6
5.1
6.0
6.2
7.1
7.4
6.9
4.3
5.4
5.6
25.1
7.0
10.9
11.4
13.0
12.6
13.8
10.7
7.7
3.9
5.1
5.4
6.4
6.7
6.3
3.5
4.7
5.0
(8.6)
4.4
7.2
10.1
10.2
12.0
8.8
5.7
1.8
3.2
3.7
4.9
5.4
5.1
2.2
3.6
3.9
19.2
16.1
17.1
15.5
16.7
12.0
7.9
3.2
4.6
5.0
6.2
6.7
6.2
3.1
4.4
4.7
13.1
16.1
14.3
16.1
10.7
6.2
1.1
3.0
3.6
5.0
5.6
5.2
1.9
3.5
3.8
19.3
14.9
17.1
10.1
4.8
(0.8)
1.6
2.5
4.2
4.9
4.5
1.0
2.8
3.2
10.6
16.0
7.2
1.5
(4.3)
(1.1)
0.3
2.4
3.4
3.1
(0.5)
1.5
2.0
21.7
5.5 (8.6)
(1.4) (11.2) (13.8)
(7.8) (15.9) (19.3) (24.5)
(3.3) (8.7) (8.7) (6.1)
(1.4) (5.4) (4.6) (1.4)
1.3 (1.8) (0.3)
3.4
2.5
0.0
1.5
4.9
2.3
0.2
1.5
4.3
(1.5) (3.8) (3.2) (1.6)
0.7 (1.2) (0.3)
1.5
1.4 (0.3)
0.6
2.3
16.9
12.8
14.8
13.9
11.2
2.9
5.9
6.3
8.8
13.7
13.0
9.9
0.3
4.1
4.8
18.9
15.1
10.2
(1.8)
3.3
4.2
11.4
6.1
1.0
(7.8) (16.2) (30.4)
(0.3) (4.0) (6.4)
1.5 (0.9) (1.5)
25.9
17.1
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
8.9 2010
1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
UK real capital value of equities

(annual average rates of return between year-ends)
105
97
95
92
100
99
112
97
95
101
99
94
90
83
80
64
51
44
44
46
29
36
48
47
53
59
60
66
74
61
59
47
62
75
82
88
99
78
68
59
47
53
61
65
70
71
80
73
64
55
57
52
46
54
74
74
62
55
76
113
108
101
94
106
91
92
81
101
137
111
95
124
130
81
30
57
48
60
57
51
56
54
62
73
88
95
112
113
113
136
107
117
131
159
140
161
175
202
218
260
233
195
142
161
170
197
213
209
139
170
180
92
90
88
95
94
107
92
91
97
95
89
86
79
76
61
48
42
42
44
28
35
46
45
50
57
57
63
71
58
57
45
59
72
78
84
94
74
65
56
45
51
58
62
67
67
76
69
61
53
54
50
44
51
70
70
59
52
72
108
103
96
89
101
87
88
77
97
131
106
91
118
124
77
29
55
46
57
54
48
53
51
59
69
83
91
107
108
107
130
102
112
125
152
133
153
167
193
208
248
222
186
136
154
162
188
203
199
133
162
172
98
95
103
102
116
100
99
105
103
97
93
86
82
67
52
45
46
48
30
38
50
49
55
62
62
68
77
63
61
49
64
78
85
91
102
80
70
61
49
55
63
68
72
73
83
75
66
57
59
54
48
56
76
76
64
57
78
117
112
104
97
110
94
96
84
105
142
115
99
129
135
84
31
59
50
62
59
53
58
56
64
75
91
99
116
117
117
141
110
122
136
165
145
166
181
209
226
269
241
202
147
167
176
204
221
217
144
176
186
97
105
104
118
102
101
107
105
99
95
88
84
68
53
46
47
49
30
38
51
49
56
63
63
70
79
64
63
50
66
79
86
93
104
82
71
62
50
56
64
69
74
75
84
77
67
59
60
55
49
57
78
78
65
58
80
120
114
106
99
112
96
97
85
107
145
117
101
131
137
85
32
60
51
64
60
54
59
57
66
77
92
101
119
119
119
144
112
124
139
168
148
169
185
213
230
274
245
206
150
170
180
208
225
221
147
179
190
HOW TO USE TABLES OF RETURNS

108
107
121
105
103
110
108
102
97
90
86
70
55
47
48
50
31
39
52
51
57
65
65
72
81
66
64
51
67
81
89
96
107
84
73
64
51
58
66
71
76
77
87
79
69
60
62
57
50
58
80
80
67
59
82
123
118
109
102
115
99
100
88
110
149
121
103
135
141
88
33
62
52
65
62
55
61
58
67
79
95
103
122
123
122
148
116
127
143
173
152
174
190
219
237
282
252
212
154
175
185
214
231
227
151
184
195
99
112
97
96
102
100
94
90
84
80
65
51
44
44
47
29
36
48
47
53
60
60
66
75
61
60
47
63
75
82
88
99
78
68
59
47
54
61
66
70
71
80
73
64
56
57
52
46
54
74
74
62
55
76
114
109
101
94
107
91
93
81
102
138
112
96
125
131
81
30
58
48
61
57
51
56
54
62
73
88
96
113
114
113
137
107
118
132
160
141
161
176
203
219
261
234
196
143
162
171
198
214
210
140
171
181
113
98
96
103
100
95
91
84
81
65
51
44
45
47
29
37
49
47
54
60
61
67
75
61
60
48
63
76
83
89
100
79
69
60
48
54
61
66
71
72
81
74
65
56
57
53
47
54
75
75
62
55
77
115
110
102
95
107
92
93
82
103
139
113
97
126
132
82
31
58
48
61
58
51
57
54
63
74
89
97
114
114
114
138
108
119
133
161
142
163
177
205
221
263
235
198
144
163
172
199
216
212
141
172
182
87
85
91
89
84
80
75
71
58
45
39
39
42
26
32
43
42
47
53
54
59
67
54
53
42
56
67
73
79
88
69
61
53
42
48
54
58
63
63
72
65
57
50
51
47
41
48
66
66
55
49
68
101
97
90
84
95
81
82
72
91
123
99
85
111
116
72
27
51
43
54
51
45
50
48
56
65
78
85
101
101
101
122
95
105
118
142
125
144
156
181
195
233
208
175
127
144
152
176
191
187
125
152
161
98
104
102
97
93
86
82
66
52
45
46
48
30
37
50
48
55
61
62
68
77
63
61
48
64
77
84
91
102
80
70
61
49
55
63
67
72
73
83
75
66
57
59
54
48
56
76
76
63
56
78
117
112
104
97
109
94
95
83
105
142
115
98
128
134
83
31
59
49
62
59
52
58
55
64
75
90
98
116
117
116
140
110
121
136
164
144
166
181
209
225
268
240
202
147
167
176
203
220
216
144
175
186
106
104
98
94
87
84
68
53
46
46
49
30
38
50
49
56
62
63
69
78
64
62
49
65
79
86
92
104
81
71
62
50
56
64
68
73
74
84
76
67
58
60
55
48
57
77
77
65
57
80
119
114
106
98
111
96
97
85
106
144
117
100
130
137
85
32
60
50
63
60
53
59
56
65
76
92
100
118
119
118
143
112
123
138
167
147
169
184
212
229
273
244
205
149
169
179
207
224
220
146
178
189
98
92
89
82
79
64
50
43
44
46
29
36
47
46
52
59
59
65
74
60
59
46
61
74
81
87
97
77
67
58
47
53
60
64
69
70
79
72
63
55
56
51
46
53
73
73
61
54
75
112
107
99
93
105
90
91
80
100
136
110
94
123
128
80
30
57
47
60
56
50
55
53
61
72
86
94
111
112
111
134
105
116
130
157
138
159
173
200
216
257
230
193
141
159
168
194
211
206
138
168
178
94
90
84
80
65
51
44
44
47
29
37
48
47
53
60
60
66
75
61
60
47
63
76
82
89
99
78
68
60
48
54
61
66
71
71
81
73
64
56
57
53
47
54
74
74
62
55
76
114
109
102
95
107
92
93
81
102
138
112
96
125
131
81
31
58
48
61
58
51
57
54
63
73
88
96
113
114
114
137
107
118
132
160
141
162
176
204
220
262
234
197
144
163
172
198
215
211
140
171
181
96
89
85
69
54
47
47
50
31
39
51
50
57
64
64
70
80
65
63
50
66
80
87
94
105
83
72
63
50
57
65
70
75
76
86
78
68
59
61
56
49
58
79
79
66
58
81
121
116
108
100
113
97
99
86
108
147
119
102
133
139
86
32
61
51
64
61
54
60
57
66
78
94
102
120
121
120
145
114
125
140
170
149
172
187
216
233
278
248
209
152
173
182
210
228
223
149
182
192
93
89
72
57
49
49
52
32
40
54
52
59
66
67
74
83
68
66
52
69
84
91
98
110
87
76
66
53
60
68
73
78
79
89
81
71
62
63
58
51
60
82
82
69
61
85
126
121
112
105
118
102
103
90
113
153
124
106
138
145
90
34
64
53
67
64
57
63
60
69
81
98
106
125
126
126
152
119
131
147
177
156
179
195
226
243
290
259
218
159
180
190
220
238
233
155
190
201
96
77
61
52
53
56
35
44
58
56
63
71
72
79
89
73
71
56
75
90
98
106
118
93
81
71
57
64
73
78
84
85
96
87
77
67
68
63
55
65
88
88
74
66
91
136
130
121
113
127
109
111
97
122
165
134
114
149
156
97
36
69
57
72
68
61
67
64
75
87
105
114
135
136
135
163
128
141
158
191
168
193
210
243
262
312
279
234
171
194
204
236
256
251
167
204
216
81
64
55
55
58
36
46
60
59
66
75
75
83
93
76
74
59
78
94
103
110
124
97
85
74
59
67
76
82
88
89
101
91
80
70
71
65
58
68
93
93
77
69
95
142
136
126
118
133
114
116
101
127
172
140
120
156
163
101
38
72
60
76
72
64
70
67
78
91
110
120
141
142
141
171
134
147
165
200
176
202
220
254
274
326
292
245
179
203
214
247
268
263
175
213
226
portfolio starts; those down the side are the dates to which the annual
rate of return is calculated. Thus the figure at the bottom right hand
corner - 106 - shows that the real capital value of a portfolio bought at
the end of December 2009 and held for one year to December 2010
was 106. Figures in brackets indicate negative returns.
79
68
68
72
45
56
75
73
82
92
93
102
116
94
92
73
97
116
127
137
153
120
105
92
73
83
94
101
109
110
124
113
99
86
88
81
72
84
114
114
95
85
118
176
168
156
146
165
141
143
125
157
213
173
148
193
202
125
47
89
74
94
89
79
87
83
96
113
136
148
175
175
175
211
165
182
204
247
217
249
272
314
339
404
361
303
221
250
264
305
331
325
216
264
279
86
87
92
57
72
95
93
104
117
118
130
147
120
117
93
123
148
161
174
195
153
134
117
93
105
120
129
138
139
158
144
126
109
112
103
91
106
145
145
121
108
150
224
214
199
185
209
180
182
159
200
271
220
188
245
257
159
60
113
94
119
113
100
111
106
123
143
173
188
222
223
222
268
210
232
259
314
276
317
345
399
431
513
459
386
281
319
336
388
421
413
275
335
355
101
106
66
83
110
107
121
136
137
151
170
139
136
108
142
172
187
201
226
178
155
135
108
122
139
149
160
162
183
166
146
127
130
119
106
123
169
169
141
125
173
259
248
231
215
243
208
211
185
232
314
255
218
284
298
185
69
131
110
138
131
116
128
123
142
166
200
218
257
259
258
311
244
269
301
364
320
367
401
463
500
595
532
447
326
369
390
450
488
479
319
389
412
105
65
82
109
106
120
135
136
150
169
137
134
106
141
170
185
200
224
176
154
134
107
121
137
148
159
160
182
165
145
126
129
118
105
122
167
167
140
124
172
257
246
228
213
240
206
209
183
230
311
252
216
281
295
183
69
130
109
137
129
115
127
122
141
165
198
216
255
256
255
308
242
266
298
361
317
364
397
458
495
590
527
443
323
366
386
446
483
474
316
385
408
62
78
103
101
114
128
129
142
160
130
128
101
134
161
176
189
212
167
146
127
102
115
130
140
151
152
172
157
138
119
122
112
99
116
159
159
132
118
163
244
233
217
202
228
196
199
174
218
296
240
205
267
280
174
65
123
103
130
123
109
121
116
134
156
188
205
242
243
243
293
229
253
283
342
301
346
377
435
470
560
501
420
306
347
367
424
459
450
300
366
387
126
166
162
183
206
207
228
258
210
205
163
215
260
283
305
341
269
234
205
163
185
210
226
242
245
277
252
221
192
196
181
160
186
255
255
213
189
262
392
375
349
325
367
315
319
279
351
475
385
330
430
450
280
105
198
166
209
198
176
194
186
215
251
303
330
389
391
390
471
369
406
455
551
484
556
606
700
755
900
805
676
493
559
590
681
738
724
482
588
623
132
129
146
164
165
182
205
167
163
130
172
207
225
243
272
214
187
163
130
147
167
180
193
195
221
201
176
153
156
144
127
148
203
203
170
151
209
312
299
278
259
292
251
254
223
280
379
307
263
342
359
223
83
158
132
166
157
140
155
148
171
200
241
263
310
312
311
375
294
324
362
439
386
443
483
558
602
717
641
539
393
445
470
543
588
577
384
469
496
98
110
124
125
137
155
126
123
98
129
156
170
183
205
161
141
123
98
111
126
136
146
147
167
151
133
115
118
109
96
112
153
153
128
114
158
236
226
210
195
221
190
192
168
211
286
232
199
258
271
168
63
119
100
125
119
106
117
112
129
151
182
199
234
235
235
283
222
244
274
331
291
334
364
421
454
541
484
407
296
336
355
410
444
435
290
354
375
113
127
128
141
159
129
126
100
133
160
174
188
210
165
144
126
101
114
129
139
149
151
171
155
136
118
121
111
98
115
157
157
131
117
162
242
231
215
200
226
194
197
172
216
293
237
203
265
277
172
65
122
102
128
122
108
120
114
133
155
187
203
240
241
240
290
227
250
280
339
298
342
373
431
465
555
496
417
304
344
363
420
455
446
297
362
384
Each figure on the bottom line of the table shows the real capital value
of 100 up to the end of December 2010 from the year shown below
the figure. The first figure is 180, showing that the accumulated capital
value of 100 for the whole period since 1899 is 180.
112
113
125
141
115
112
89
118
142
155
166
186
147
128
112
89
101
115
123
132
134
151
137
121
105
107
99
87
102
139
139
116
103
143
214
205
190
177
201
172
174
153
192
260
210
180
235
246
153
57
108
90
114
108
96
106
101
117
137
165
180
213
214
213
257
202
222
248
301
264
304
331
382
413
492
440
369
269
305
322
372
403
395
263
321
340
101
111
125
102
100
79
105
126
137
148
166
130
114
100
79
90
102
110
118
119
135
122
108
93
95
88
78
91
124
124
103
92
127
190
182
169
158
178
153
155
136
171
231
187
160
209
219
136
51
96
80
101
96
85
94
90
104
122
147
160
189
190
189
229
179
197
221
268
235
270
294
340
367
437
391
328
239
271
286
331
359
352
234
286
303
110
124
101
99
78
104
125
137
147
165
130
113
99
79
89
101
109
117
118
134
121
107
93
95
87
77
90
123
123
103
91
127
189
181
168
157
177
152
154
135
169
229
186
159
207
217
135
51
96
80
101
95
85
94
90
104
121
146
159
188
189
188
227
178
196
219
266
234
268
292
338
364
434
388
326
238
270
284
329
356
349
233
284
300
113
92
90
71
94
114
124
133
150
118
103
90
71
81
92
99
106
107
121
110
97
84
86
79
70
82
112
112
93
83
115
172
164
153
142
161
138
140
122
154
208
169
145
188
197
122
46
87
73
91
87
77
85
81
94
110
133
145
171
171
171
206
162
178
199
241
212
243
265
307
331
394
353
296
216
245
258
298
323
317
211
258
273
81
80
63
84
101
110
118
133
104
91
80
63
72
81
88
94
95
108
98
86
74
76
70
62
72
99
99
83
73
102
152
146
135
126
142
122
124
108
136
184
149
128
167
175
108
41
77
64
81
77
68
75
72
83
98
118
128
151
152
151
183
143
158
177
214
188
216
235
272
293
349
312
262
191
217
229
264
286
281
187
228
242
98
78
103
124
135
145
163
128
112
98
78
88
100
108
116
117
132
120
106
92
94
86
76
89
122
122
102
90
125
187
179
166
155
175
150
152
133
167
227
184
157
205
215
133
50
95
79
99
94
84
93
89
103
120
144
157
186
187
186
225
176
194
217
263
231
265
289
334
360
429
384
322
235
266
281
325
352
345
230
281
297
79
105
127
138
148
166
131
114
100
80
90
102
110
118
119
135
123
108
94
96
88
78
91
124
124
104
92
128
191
183
170
158
179
154
156
136
171
232
188
161
209
219
136
51
97
81
102
96
86
95
91
105
123
148
161
190
191
190
229
180
198
222
268
236
271
295
341
368
439
392
329
240
272
287
332
360
353
235
287
304
132
160
174
187
210
165
144
126
100
114
129
139
149
150
170
155
136
118
121
111
98
115
157
157
131
116
161
241
231
214
200
226
194
196
172
216
292
237
203
264
277
172
64
122
102
128
121
108
119
114
132
155
186
203
239
241
240
290
227
250
280
339
298
342
373
430
465
554
495
416
303
344
363
419
454
445
296
362
383
121
131
142
159
125
109
95
76
86
97
105
113
114
129
117
103
89
91
84
74
87
118
118
99
88
122
182
174
162
151
171
146
148
130
163
221
179
153
200
209
130
49
92
77
97
92
82
90
86
100
117
141
153
181
182
181
219
171
189
211
256
225
258
281
325
351
418
374
314
229
260
274
316
343
336
224
273
289
109
117
132
103
90
79
63
71
81
87
93
94
107
97
85
74
76
70
62
72
98
98
82
73
101
151
144
134
125
141
121
123
108
135
183
148
127
166
173
108
40
76
64
80
76
68
75
72
83
97
117
127
150
151
150
181
142
157
175
212
186
214
233
270
291
347
310
260
190
215
227
262
284
279
186
227
240
108
121
95
83
72
58
65
74
80
86
86
98
89
78
68
69
64
56
66
90
90
75
67
93
139
132
123
115
130
111
113
99
124
168
136
117
152
159
99
37
70
59
74
70
62
69
66
76
89
107
117
138
138
138
166
130
144
161
195
171
196
214
247
267
318
284
239
174
197
208
241
261
256
170
208
220
112
88
77
67
54
61
69
74
80
80
91
83
73
63
64
59
52
61
84
84
70
62
86
129
123
114
107
120
103
105
92
115
156
126
108
141
148
92
34
65
54
68
65
58
64
61
71
83
99
108
128
128
128
155
121
133
149
181
159
182
199
230
248
295
264
222
162
183
194
224
242
238
158
193
204
79
69
60
48
54
61
66
71
72
81
74
65
56
58
53
47
55
75
75
62
55
77
115
110
102
95
108
92
94
82
103
139
113
97
126
132
82
31
58
49
61
58
51
57
54
63
74
89
97
114
115
114
138
108
119
133
161
142
163
177
205
221
264
236
198
144
164
173
200
216
212
141
172
182
87
76
61
69
78
84
90
91
103
94
82
71
73
67
59
69
95
95
79
71
98
146
140
130
121
137
117
119
104
131
177
143
123
160
168
104
39
74
62
78
74
65
72
69
80
94
113
123
145
146
145
175
137
151
169
205
180
207
226
261
281
335
300
252
184
208
220
254
275
270
180
219
232
87
70
79
89
96
103
104
118
107
94
82
84
77
68
79
109
109
91
81
112
167
160
149
138
157
134
136
119
150
203
164
141
183
192
119
45
85
71
89
84
75
83
79
92
107
129
141
166
167
166
201
157
173
194
235
206
237
258
299
322
384
343
288
210
238
252
291
315
309
206
251
266
The top figure in each column is the capital value in the first year, so
that reading diagonally down the table gives the capital value in each
year since 1899. The table can be used to see the cumulative capital
growth over any period; thus a 100 investment made at the end of
1900 would have fallen to 92 in one year but, over the first five years
(up to the end of 1905), would have climbed back up to 94, 6 below
the original investment.
80
90
102
110
118
119
135
123
108
94
96
88
78
91
125
124
104
92
128
191
183
170
158
179
154
156
136
171
232
188
161
210
220
136
51
97
81
102
96
86
95
91
105
123
148
161
190
191
190
230
180
198
222
269
236
271
296
342
369
439
393
330
241
273
288
333
360
353
235
287
304
113
129
138
148
150
170
154
136
118
120
111
98
114
156
156
131
116
161
240
230
214
199
225
193
196
171
215
291
236
202
263
276
171
64
122
102
128
121
108
119
114
132
154
186
202
239
240
239
288
226
249
279
337
297
340
371
429
463
551
493
414
302
342
361
417
452
443
295
360
382
113
122
131
132
150
136
120
104
106
98
86
101
138
138
115
102
142
212
203
189
176
199
170
173
151
190
257
208
179
232
244
151
57
107
90
113
107
95
105
100
116
136
164
179
211
212
211
255
200
220
246
298
262
301
328
378
409
487
435
366
266
302
319
368
399
391
261
318
337
108
115
117
132
120
106
92
94
86
76
89
122
122
102
90
125
187
179
166
155
175
150
152
133
167
227
184
157
205
215
133
50
95
79
99
94
84
93
89
103
120
144
157
186
186
186
224
176
194
217
263
231
265
289
334
360
429
384
322
235
266
281
325
352
345
230
280
297
107
108
123
111
98
85
87
80
71
83
113
113
94
84
116
174
166
154
144
163
140
141
124
155
210
171
146
190
199
124
46
88
73
92
87
78
86
82
95
111
134
146
172
173
173
208
163
180
201
244
214
246
268
310
335
399
356
299
218
247
261
302
327
321
213
260
276
101
114
104
91
79
81
75
66
77
105
105
88
78
108
162
155
144
134
152
130
132
115
145
196
159
136
177
186
115
43
82
68
86
82
73
80
77
89
104
125
136
161
161
161
194
152
168
188
227
200
229
250
289
312
372
332
279
203
231
243
281
305
299
199
243
257
113
103
90
78
80
74
65
76
104
104
87
77
107
160
153
143
133
150
129
131
114
143
194
157
135
176
184
114
43
81
68
85
81
72
79
76
88
103
124
135
159
160
159
193
151
166
186
225
198
227
248
286
309
368
329
276
201
228
241
279
302
296
197
241
255
91
80
69
71
65
58
67
92
92
77
68
95
141
135
126
117
132
114
115
101
127
172
139
119
155
162
101
38
72
60
75
71
63
70
67
78
91
109
119
141
141
141
170
133
147
164
199
175
201
219
253
273
325
290
244
178
202
213
246
266
261
174
212
225
88
76
78
72
63
74
101
101
85
75
104
156
149
139
129
146
125
127
111
139
189
153
131
171
179
111
42
79
66
83
78
70
77
74
85
100
120
131
155
155
155
187
147
161
181
219
192
221
241
278
300
358
320
269
196
222
234
271
293
288
191
234
247
87
89
82
72
84
115
115
96
86
119
177
169
158
147
166
142
144
126
159
215
174
149
194
203
126
47
90
75
94
89
79
88
84
97
114
137
149
176
177
176
213
167
184
206
249
219
251
274
316
341
407
364
305
223
252
266
308
333
327
218
266
281
102
94
83
97
133
133
111
99
137
204
195
182
169
191
164
166
146
183
248
201
172
224
235
146
55
103
86
109
103
92
101
97
112
131
158
172
203
204
203
245
192
212
237
287
252
290
316
365
394
469
419
352
257
291
307
355
385
377
251
306
324
92
81
95
130
130
108
96
134
200
191
178
165
187
160
163
142
179
242
196
168
219
229
142
53
101
84
106
101
90
99
95
110
128
154
168
198
199
199
240
188
207
232
280
246
283
308
356
385
458
410
344
251
284
300
347
376
369
245
299
317
89
103
141
141
118
105
145
217
208
193
180
203
175
177
155
194
263
213
183
238
249
155
58
110
92
116
109
97
108
103
119
139
168
183
216
217
216
261
204
225
252
305
268
308
336
388
419
499
446
375
273
310
327
377
409
401
267
326
345
117
160
160
133
119
164
245
235
218
203
230
197
200
175
220
298
241
207
269
282
175
66
124
104
131
124
110
121
116
135
157
190
207
244
245
244
295
231
254
285
345
303
348
379
438
473
563
504
423
308
350
369
426
462
453
302
368
390
137
137
114
102
141
210
201
187
174
197
169
171
150
188
255
207
177
231
242
150
56
106
89
112
106
94
104
100
115
135
163
177
209
210
209
253
198
218
244
296
260
298
325
376
405
483
432
363
264
300
316
366
396
389
259
316
334
100
84
74
103
154
147
137
127
144
124
125
110
138
186
151
129
168
177
110
41
78
65
82
77
69
76
73
84
99
119
129
153
153
153
185
145
159
178
216
190
218
237
274
296
353
316
265
193
219
231
267
289
284
189
231
244
84
74
103
154
147
137
127
144
124
125
110
138
186
151
129
168
177
110
41
78
65
82
77
69
76
73
84
99
119
129
153
153
153
185
145
159
178
216
190
218
237
274
296
353
316
265
193
219
231
267
289
284
189
231
244
89
123
184
176
164
152
172
148
150
131
165
223
181
155
202
211
131
49
93
78
98
93
83
91
87
101
118
142
155
183
184
183
221
173
191
214
259
227
261
284
329
355
423
378
317
231
262
277
320
347
340
226
276
292
139
207
198
184
171
194
166
169
148
185
251
203
174
227
238
148
55
105
87
110
104
93
102
98
114
133
160
174
206
207
206
249
195
215
240
291
256
293
320
370
399
475
425
357
260
295
311
360
390
382
255
311
329
149
143
133
124
140
120
122
107
134
181
147
126
164
172
107
40
76
63
80
75
67
74
71
82
96
115
126
148
149
149
179
141
155
173
210
185
212
231
267
288
343
307
258
188
213
225
260
281
276
184
224
237
96
89
83
94
80
81
71
90
121
98
84
110
115
71
27
51
42
53
50
45
49
47
55
64
77
84
99
100
99
120
94
104
116
140
123
142
154
179
193
230
205
172
126
143
150
174
188
185
123
150
159
93
87
98
84
85
75
94
127
103
88
115
120
75
28
53
44
56
53
47
52
50
57
67
81
88
104
104
104
126
98
108
121
147
129
148
162
187
201
240
215
180
131
149
157
182
197
193
129
157
166
93
105
90
92
80
101
136
110
95
123
129
80
30
57
48
60
57
50
56
53
62
72
87
95
112
112
112
135
106
117
130
158
139
159
174
201
217
258
231
194
141
160
169
195
212
208
138
169
179
113
97
98
86
108
146
119
102
132
139
86
32
61
51
64
61
54
60
57
66
77
93
102
120
120
120
145
114
125
140
170
149
171
187
216
233
277
248
208
152
172
182
210
227
223
148
181
192
86
87
76
96
129
105
90
117
123
76
29
54
45
57
54
48
53
51
59
68
83
90
106
107
106
128
100
111
124
150
132
151
165
191
206
245
219
184
134
152
161
186
201
197
131
160
170
101
89
111
151
122
105
136
143
89
33
63
53
66
63
56
62
59
68
80
96
105
124
124
124
149
117
129
144
175
154
176
192
222
240
286
255
215
156
177
187
216
234
230
153
187
198
88
110
149
121
103
135
141
88
33
62
52
65
62
55
61
58
67
79
95
103
122
123
122
147
116
127
142
172
152
174
190
219
237
282
252
212
154
175
185
213
231
227
151
184
195
126
170
138
118
154
161
100
38
71
59
75
71
63
69
66
77
90
108
118
139
140
140
168
132
145
163
197
173
199
217
250
270
322
288
242
176
200
211
244
264
259
172
210
223
135
110
94
122
128
80
30
57
47
59
56
50
55
53
61
72
86
94
111
111
111
134
105
116
130
157
138
158
173
199
215
256
229
193
140
159
168
194
210
206
137
168
177
81
69
90
95
59
22
42
35
44
42
37
41
39
45
53
64
69
82
82
82
99
78
85
96
116
102
117
127
147
159
189
169
142
104
118
124
143
155
152
101
124
131
86
112
117
73
27
51
43
54
51
46
50
48
56
65
79
86
101
102
101
122
96
106
118
143
126
144
157
182
196
234
209
176
128
145
153
177
192
188
125
153
162
130
136
85
32
60
50
63
60
53
59
56
65
76
92
100
118
118
118
143
112
123
138
167
147
168
183
212
229
273
244
205
149
169
179
206
224
219
146
178
189
105
65
24
46
39
49
46
41
45
43
50
59
70
77
91
91
91
110
86
95
106
128
113
129
141
163
176
209
187
157
115
130
137
159
172
168
112
137
145
62
23
44
37
46
44
39
43
41
48
56
67
73
86
87
87
105
82
90
101
122
107
123
135
155
168
200
179
150
109
124
131
151
164
161
107
131
138
37
71
59
75
71
63
69
66
77
90
108
118
139
140
140
168
132
145
163
197
173
199
217
250
270
322
288
242
176
200
211
244
264
259
172
210
223
189
158
199
188
168
185
177
205
240
289
315
372
373
372
449
352
388
434
525
462
530
578
668
721
859
768
645
470
533
563
650
704
691
460
561
594
84
105
100
89
98
94
108
127
153
166
196
197
197
237
186
205
229
278
244
280
305
353
381
454
406
341
248
282
297
344
372
365
243
297
314
126
119
106
117
112
130
152
183
199
235
236
235
284
223
245
275
332
292
335
366
422
456
543
486
408
297
337
356
411
446
437
291
355
376
95
84
93
89
103
121
145
158
187
188
187
226
177
195
218
264
232
266
290
336
362
432
386
324
236
268
283
327
354
347
231
282
299
89
98
94
109
127
153
167
197
198
197
238
187
206
230
279
245
281
307
354
382
456
407
342
249
283
299
345
374
366
244
298
315
110
106
122
143
172
188
221
222
222
268
210
231
259
313
275
316
345
398
430
512
458
385
280
318
335
388
420
412
274
335
354
96
111
130
156
170
201
202
201
243
190
209
234
284
249
286
312
361
389
464
415
348
254
288
304
351
380
373
248
303
321
116
135
163
178
210
211
210
254
199
219
245
296
261
299
326
377
407
485
433
364
265
301
317
367
397
390
260
317
335
117
141
153
181
182
181
219
172
189
211
256
225
258
282
325
351
418
374
314
229
260
274
317
343
337
224
273
290
121
131
155
156
155
187
147
162
181
219
193
221
241
278
301
358
320
269
196
222
235
271
294
288
192
234
248
109
129
129
129
155
122
134
150
182
160
183
200
231
249
297
266
223
163
184
195
225
244
239
159
194
206
118
118
118
143
112
123
138
167
147
168
183
212
229
273
244
205
149
169
179
206
224
219
146
178
189
100
100
121
95
104
117
141
124
143
156
180
194
231
207
174
127
143
151
175
190
186
124
151
160
100
120
94
104
116
141
124
142
155
179
193
230
206
173
126
143
151
174
189
185
123
150
159
121
95
104
117
141
124
142
155
179
194
231
206
173
126
143
151
175
189
186
124
151
160
78
86
97
117
103
118
129
149
160
191
171
144
105
119
125
145
157
154
102
125
132
110
123
149
131
151
164
190
205
244
218
183
134
151
160
185
200
196
131
159
169
112
135
119
137
149
172
186
221
198
166
121
137
145
168
182
178
119
145
153
121
106
122
133
154
166
198
177
149
108
123
130
150
162
159
106
129
137
88
101
110
127
137
163
146
123
89
101
107
124
134
131
88
107
113
115
125
145
156
186
166
140
102
115
122
141
153
150
100
122
129
109
126
136
162
145
122
89
101
106
123
133
130
87
106
112
116
125
149
133
112
81
92
97
112
122
119
80
97
103
108
129
115
97
70
80
84
97
105
103
69
84
89
119
107
89
65
74
78
90
98
96
64
78
82
89
75
55
62
66
76
82
80
54
65
69
84
61
69
73
85
92
90
60
73
77
73
83
87
101
109
107
71
87
92
113
120
138
150
147
98
119
126
106
122
132
130
86
105
111
116
125
123
82
100
106
108
106
71
86
91
98
65
80
84
67
81
86
122
129
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
106 2010
1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
UK real return on gilts - gross income re-invested

1899
1900
1901
1902
1903
(2.1)
(1.6)
(1.5)
(1.9)
(0.7)
(0.0)
0.8
(0.5)
(0.4)
(0.2)
(0.3)
(0.5)
(0.6)
(0.7)
(0.3)
(1.4)
(3.6)
(4.3)
(4.1)
(4.5)
(5.4)
(3.2)
(2.0)
(1.7)
(1.4)
(1.3)
(1.2)
(0.7)
(0.4)
(0.5)
0.2
0.3
1.4
1.5
2.1
1.9
1.8
1.4
1.3
1.1
1.1
1.2
1.3
1.3
1.3
1.6
1.8
1.3
1.2
0.9
0.9
0.5
0.4
0.6
0.6
0.3
0.2
(0.0)
0.2
0.2
0.1
(0.1)
0.2
0.2
0.1
0.1
0.1
0.1
(0.0)
(0.1)
(0.1)
0.1
(0.1)
(0.3)
(0.8)
(0.6)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.1)
(0.0)
0.0
0.1
0.2
0.2
0.2
0.2
0.3
0.5
0.7
0.6
0.7
0.7
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
(1.0)
(1.1)
(1.8)
(0.4)
0.4
1.3
(0.3)
(0.2)
0.0
(0.1)
(0.3)
(0.5)
(0.6)
(0.2)
(1.4)
(3.7)
(4.4)
(4.3)
(4.6)
(5.6)
(3.3)
(2.0)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.4)
(0.4)
0.3
0.4
1.6
1.6
2.3
2.1
1.9
1.4
1.4
1.1
1.2
1.3
1.4
1.3
1.4
1.7
1.8
1.4
1.3
1.0
1.0
0.6
0.4
0.6
0.7
0.3
0.2
0.0
0.3
0.3
0.1
(0.1)
0.2
0.3
0.1
0.1
0.1
0.1
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.0)
(0.0)
0.0
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
(1.2)
(2.2)
(0.1)
0.8
1.7
(0.2)
(0.1)
0.1
(0.0)
(0.3)
(0.4)
(0.5)
(0.1)
(1.4)
(3.9)
(4.6)
(4.4)
(4.8)
(5.8)
(3.4)
(2.1)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.4)
(0.4)
0.3
0.4
1.6
1.7
2.4
2.1
2.0
1.5
1.5
1.2
1.2
1.4
1.4
1.4
1.5
1.7
1.9
1.5
1.3
1.0
1.0
0.6
0.4
0.7
0.7
0.4
0.3
0.0
0.3
0.3
0.1
(0.1)
0.3
0.3
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
(0.0)
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.1
1.1
1.1
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.2
(3.1)
0.4
1.4
2.5
0.0
0.1
0.3
0.1
(0.2)
(0.4)
(0.4)
(0.0)
(1.4)
(4.1)
(4.8)
(4.6)
(5.0)
(6.1)
(3.5)
(2.1)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.3)
(0.4)
0.4
0.5
1.7
1.8
2.5
2.2
2.1
1.6
1.6
1.3
1.3
1.5
1.5
1.5
1.5
1.8
2.0
1.5
1.4
1.1
1.1
0.6
0.5
0.7
0.7
0.4
0.3
0.1
0.3
0.3
0.2
(0.0)
0.3
0.3
0.2
0.2
0.2
0.2
0.1
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.7)
(0.6)
(0.6)
(0.3)
(0.4)
(0.5)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.8
0.8
1.0
1.2
1.1
1.1
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
4.0
3.8
4.4
0.8
0.8
0.9
0.6
0.2
(0.0)
(0.2)
0.2
(1.3)
(4.1)
(4.9)
(4.7)
(5.1)
(6.2)
(3.5)
(2.0)
(1.7)
(1.4)
(1.2)
(1.1)
(0.5)
(0.2)
(0.2)
0.5
0.6
1.9
2.0
2.7
2.4
2.3
1.7
1.7
1.4
1.4
1.6
1.6
1.6
1.7
1.9
2.1
1.6
1.5
1.2
1.2
0.7
0.5
0.8
0.8
0.5
0.3
0.1
0.4
0.4
0.2
0.0
0.3
0.4
0.2
0.2
0.2
0.2
0.1
0.0
(0.0)
0.2
0.0
(0.2)
(0.7)
(0.6)
(0.6)
(0.2)
(0.4)
(0.5)
(0.4)
(0.6)
(0.1)
0.0
0.1
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.2
1.3
1.3
1.3
3.6
4.6
(0.2)
(0.0)
0.3
0.0
(0.3)
(0.5)
(0.6)
(0.1)
(1.7)
(4.8)
(5.6)
(5.3)
(5.7)
(6.8)
(3.9)
(2.4)
(2.0)
(1.6)
(1.4)
(1.3)
(0.7)
(0.4)
(0.4)
0.4
0.5
1.8
1.9
2.6
2.4
2.2
1.7
1.6
1.3
1.4
1.5
1.6
1.5
1.6
1.9
2.1
1.6
1.4
1.1
1.1
0.6
0.5
0.7
0.7
0.4
0.3
0.1
0.3
0.3
0.2
(0.1)
0.3
0.3
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.8
0.8
1.0
1.2
1.1
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
5.6
(2.0)
(1.2)
(0.5)
(0.6)
(1.0)
(1.1)
(1.1)
(0.5)
(2.2)
(5.5)
(6.3)
(6.0)
(6.3)
(7.5)
(4.4)
(2.7)
(2.2)
(1.9)
(1.7)
(1.5)
(0.9)
(0.6)
(0.6)
0.2
0.4
1.8
1.8
2.6
2.3
2.2
1.6
1.6
1.2
1.3
1.5
1.5
1.5
1.5
1.8
2.0
1.5
1.4
1.1
1.1
0.6
0.4
0.7
0.7
0.3
0.2
(0.0)
0.3
0.3
0.1
(0.1)
0.2
0.2
0.1
0.1
0.1
0.1
(0.0)
(0.1)
(0.1)
0.1
(0.1)
(0.4)
(0.8)
(0.7)
(0.7)
(0.3)
(0.5)
(0.6)
(0.6)
(0.7)
(0.2)
(0.1)
(0.0)
0.0
0.1
0.2
0.3
0.2
0.2
0.3
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.1
1.1
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
(9.1)
(4.4)
(2.4)
(2.1)
(2.2)
(2.2)
(2.1)
(1.3)
(3.1)
(6.6)
(7.3)
(6.9)
(7.2)
(8.4)
(5.0)
(3.2)
(2.7)
(2.3)
(2.0)
(1.8)
(1.2)
(0.8)
(0.8)
0.0
0.2
1.6
1.7
2.5
2.2
2.1
1.5
1.5
1.1
1.2
1.3
1.4
1.4
1.4
1.7
1.9
1.4
1.3
1.0
1.0
0.5
0.3
0.5
0.6
0.2
0.1
(0.1)
0.2
0.2
0.0
(0.2)
0.1
0.2
0.0
0.0
0.0
0.0
(0.1)
(0.2)
(0.2)
0.0
(0.2)
(0.4)
(0.9)
(0.8)
(0.8)
(0.4)
(0.6)
(0.7)
(0.6)
(0.8)
(0.3)
(0.1)
(0.1)
(0.0)
0.0
0.2
0.2
0.2
0.1
0.3
0.5
0.7
0.5
0.7
0.7
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
0.5
1.1
0.3
(0.4)
(0.7)
(0.8)
(0.1)
(2.3)
(6.3)
(7.2)
(6.7)
(7.0)
(8.3)
(4.7)
(2.8)
(2.3)
(1.9)
(1.6)
(1.4)
(0.7)
(0.4)
(0.4)
0.4
0.6
2.1
2.1
2.9
2.6
2.5
1.9
1.8
1.5
1.5
1.7
1.7
1.7
1.7
2.0
2.2
1.7
1.6
1.2
1.2
0.7
0.5
0.8
0.8
0.4
0.3
0.1
0.3
0.4
0.2
(0.1)
0.3
0.3
0.2
0.2
0.2
0.2
0.1
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.8)
(0.7)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.2
1.3
1.3
1.3
1.7
0.2
(0.7)
(1.1)
(1.1)
(0.2)
(2.7)
(7.1)
(8.0)
(7.4)
(7.7)
(9.0)
(5.1)
(3.0)
(2.5)
(2.0)
(1.7)
(1.6)
(0.8)
(0.5)
(0.5)
0.4
0.6
2.1
2.2
3.0
2.7
2.5
1.9
1.9
1.5
1.5
1.7
1.7
1.7
1.8
2.1
2.3
1.7
1.6
1.2
1.2
0.7
0.5
0.8
0.8
0.4
0.3
0.1
0.3
0.4
0.2
(0.1)
0.3
0.3
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.8)
(0.7)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.0)
0.0
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.2
1.2
1.2
1.3
1.2
1.3
1.3
1.2
1.2
1.3
1.3
1.3
(1.3)
(1.9) (2.6)
(2.0) (2.3) (2.0)
(1.8) (2.0) (1.7) (1.4)
(0.6) (0.4)
0.3
1.5
4.5
(3.4) (3.8) (4.1) (4.8) (6.5) (16.3)
(8.3) (9.4) (10.7) (12.8) (16.3) (25.0) (32.8)
(9.1) (10.2) (11.4) (13.1) (15.9) (21.7) (24.3) (14.7)
(8.3) (9.2) (10.1) (11.4) (13.3) (17.2) (17.5) (8.6) (2.0)
(8.6) (9.3) (10.2) (11.3) (12.8) (15.9) (15.8) (9.2) (6.4) (10.5)
(9.9) (10.8) (11.6) (12.7) (14.3) (17.0) (17.2) (12.7) (12.1) (16.7) (22.5)
(5.6) (6.0) (6.4) (6.8) (7.5) (9.1) (7.8) (1.8)
1.7
3.0 10.5
(3.4) (3.6) (3.7) (3.8) (4.1) (5.1) (3.4)
2.6
6.5
8.7 16.1
(2.7) (2.9) (2.9) (3.0) (3.1) (3.9) (2.3)
3.1
6.4
8.2 13.5
(2.3) (2.3) (2.3) (2.3) (2.4) (3.1) (1.5)
3.3
6.2
7.6 11.7
(2.0) (2.0) (2.0) (2.0) (2.0) (2.6) (1.1)
3.3
5.8
6.9 10.1
(1.7) (1.8) (1.7) (1.7) (1.7) (2.2) (0.8)
3.1
5.3
6.3
8.9
(0.9) (0.9) (0.8) (0.7) (0.7) (1.1)
0.3
4.0
6.1
7.1
9.5
(0.6) (0.5) (0.4) (0.3) (0.2) (0.6)
0.8
4.2
6.1
7.0
9.1
(0.6) (0.6) (0.4) (0.4) (0.3) (0.6)
0.6
3.8
5.5
6.2
8.1
0.4
0.5
0.6
0.8
0.9
0.7
1.9
5.0
6.7
7.5
9.3
0.5
0.6
0.8
1.0
1.1
0.9
2.1
5.0
6.5
7.2
8.8
2.2
2.3
2.6
2.8
3.0
2.9
4.2
7.1
8.7
9.5 11.3
2.2
2.4
2.6
2.8
3.0
3.0
4.1
6.9
8.4
9.1 10.7
3.1
3.3
3.5
3.8
4.1
4.0
5.2
7.9
9.4 10.1 11.7
2.8
2.9
3.2
3.4
3.6
3.6
4.7
7.2
8.5
9.2 10.6
2.6
2.7
2.9
3.2
3.4
3.3
4.3
6.7
7.9
8.5
9.7
1.9
2.0
2.2
2.4
2.5
2.5
3.4
5.6
6.7
7.2
8.2
1.9
2.0
2.1
2.3
2.5
2.4
3.3
5.3
6.4
6.8
7.8
1.5
1.6
1.7
1.9
2.0
1.9
2.7
4.6
5.6
6.0
6.9
1.5
1.6
1.8
1.9
2.0
1.9
2.7
4.6
5.5
5.9
6.7
1.7
1.8
1.9
2.1
2.2
2.1
2.9
4.7
5.6
5.9
6.7
1.7
1.8
2.0
2.1
2.2
2.2
2.9
4.6
5.5
5.8
6.6
1.7
1.8
1.9
2.1
2.2
2.1
2.8
4.5
5.3
5.6
6.3
1.8
1.9
2.0
2.1
2.2
2.2
2.9
4.5
5.2
5.5
6.2
2.1
2.2
2.3
2.5
2.6
2.5
3.2
4.8
5.5
5.8
6.5
2.3
2.4
2.5
2.7
2.8
2.8
3.4
4.9
5.7
6.0
6.6
1.7
1.8
1.9
2.1
2.2
2.1
2.7
4.2
4.8
5.1
5.7
1.6
1.7
1.8
1.9
2.0
1.9
2.5
3.9
4.5
4.8
5.3
1.2
1.3
1.4
1.5
1.6
1.5
2.1
3.4
4.0
4.2
4.7
1.2
1.3
1.4
1.5
1.5
1.5
2.0
3.3
3.9
4.1
4.6
0.7
0.7
0.8
0.9
0.9
0.8
1.4
2.6
3.1
3.3
3.7
0.5
0.5
0.6
0.7
0.7
0.6
1.1
2.3
2.8
3.0
3.4
0.8
0.8
0.9
1.0
1.0
0.9
1.4
2.6
3.1
3.2
3.7
0.8
0.8
0.9
1.0
1.0
1.0
1.4
2.5
3.1
3.2
3.6
0.4
0.4
0.5
0.6
0.6
0.5
1.0
2.1
2.5
2.7
3.1
0.3
0.3
0.4
0.4
0.5
0.4
0.8
1.8
2.3
2.4
2.8
0.0
0.1
0.1
0.2
0.2
0.1
0.5
1.5
2.0
2.1
2.4
0.3
0.4
0.4
0.5
0.5
0.4
0.8
1.8
2.3
2.4
2.7
0.3
0.4
0.4
0.5
0.5
0.4
0.8
1.8
2.2
2.3
2.7
0.1
0.2
0.2
0.3
0.3
0.2
0.6
1.6
2.0
2.1
2.4
(0.1) (0.1) (0.0)
0.0
0.0 (0.1)
0.3
1.2
1.6
1.7
2.0
0.3
0.3
0.4
0.4
0.4
0.4
0.7
1.6
2.0
2.1
2.4
0.3
0.3
0.4
0.4
0.5
0.4
0.8
1.6
2.0
2.1
2.4
0.2
0.2
0.2
0.3
0.3
0.2
0.6
1.5
1.8
1.9
2.2
0.2
0.2
0.2
0.3
0.3
0.2
0.6
1.4
1.8
1.9
2.2
0.2
0.2
0.2
0.3
0.3
0.2
0.6
1.4
1.8
1.8
2.1
0.2
0.2
0.2
0.3
0.3
0.2
0.6
1.4
1.7
1.8
2.1
0.0
0.0
0.1
0.1
0.2
0.1
0.4
1.2
1.5
1.6
1.9
(0.1) (0.0)
0.0
0.1
0.1 (0.0)
0.3
1.1
1.4
1.5
1.7
(0.1) (0.1) (0.1) (0.0)
0.0 (0.1)
0.2
1.0
1.3
1.4
1.6
0.1
0.2
0.2
0.2
0.3
0.2
0.5
1.3
1.6
1.7
1.9
(0.0) (0.0)
0.0
0.1
0.1
0.0
0.3
1.0
1.3
1.4
1.6
(0.3) (0.3) (0.3) (0.3) (0.2) (0.3) (0.0)
0.7
1.0
1.0
1.3
(0.9) (0.9) (0.8) (0.8) (0.8) (0.9) (0.6)
0.1
0.4
0.4
0.6
(0.7) (0.7) (0.7) (0.7) (0.6) (0.7) (0.4)
0.2
0.5
0.6
0.8
(0.7) (0.7) (0.7) (0.7) (0.6) (0.7) (0.5)
0.2
0.5
0.5
0.7
(0.3) (0.3) (0.3) (0.3) (0.2) (0.3) (0.0)
0.6
0.9
0.9
1.2
(0.5) (0.5) (0.4) (0.4) (0.4) (0.5) (0.2)
0.5
0.7
0.8
1.0
(0.6) (0.6) (0.6) (0.6) (0.6) (0.6) (0.4)
0.3
0.5
0.6
0.8
(0.6) (0.5) (0.5) (0.5) (0.5) (0.6) (0.3)
0.3
0.6
0.6
0.8
(0.7) (0.7) (0.6) (0.6) (0.6) (0.7) (0.4)
0.2
0.4
0.5
0.7
(0.2) (0.2) (0.1) (0.1) (0.1) (0.1)
0.1
0.7
1.0
1.0
1.2
(0.0) (0.0)
0.0
0.0
0.1 (0.0)
0.3
0.9
1.1
1.2
1.4
(0.0) (0.0)
0.0
0.1
0.1
0.0
0.3
0.9
1.1
1.2
1.4
0.0
0.1
0.1
0.1
0.1
0.1
0.3
0.9
1.2
1.2
1.4
0.1
0.2
0.2
0.2
0.2
0.2
0.4
1.0
1.3
1.3
1.5
0.3
0.3
0.3
0.4
0.4
0.3
0.6
1.2
1.4
1.5
1.6
0.3
0.3
0.4
0.4
0.4
0.4
0.6
1.2
1.4
1.5
1.7
0.3
0.3
0.3
0.4
0.4
0.3
0.6
1.1
1.4
1.4
1.6
0.2
0.3
0.3
0.3
0.3
0.3
0.5
1.1
1.3
1.4
1.5
0.4
0.4
0.4
0.5
0.5
0.5
0.7
1.2
1.5
1.5
1.7
0.6
0.6
0.6
0.7
0.7
0.6
0.9
1.4
1.6
1.7
1.9
0.8
0.9
0.9
0.9
1.0
0.9
1.2
1.7
1.9
2.0
2.2
0.6
0.7
0.7
0.7
0.8
0.7
1.0
1.5
1.7
1.8
1.9
0.8
0.8
0.9
0.9
0.9
0.9
1.1
1.7
1.9
1.9
2.1
0.9
0.9
0.9
1.0
1.0
0.9
1.2
1.7
1.9
2.0
2.1
1.0
1.0
1.1
1.1
1.1
1.1
1.3
1.9
2.1
2.1
2.3
1.2
1.2
1.3
1.3
1.4
1.3
1.6
2.1
2.3
2.4
2.5
1.1
1.2
1.2
1.3
1.3
1.2
1.5
2.0
2.2
2.3
2.4
1.2
1.2
1.3
1.3
1.3
1.3
1.5
2.0
2.3
2.3
2.5
2.2
2.3
2.5
1.2
1.2
1.3
1.3
1.3
1.3
1.5
2.0
1.2
1.3
1.3
1.4
1.4
1.4
1.6
2.1
2.3
2.3
2.5
1.2
1.2
1.3
1.3
1.4
1.3
1.5
2.0
2.2
2.3
2.5
1.2
1.3
1.3
1.4
1.4
1.3
1.6
2.0
2.3
2.3
2.5
1.3
1.3
1.4
1.4
1.4
1.4
1.6
2.1
2.3
2.3
2.5
1.2
1.3
1.3
1.3
1.4
1.3
1.5
2.0
2.2
2.3
2.4
1.2
1.3
1.3
1.3
1.4
1.3
1.5
2.0
2.2
2.3
2.4
1.3
1.4
1.4
1.4
1.5
1.4
1.7
2.1
2.3
2.4
2.5
1.3
1.3
1.4
1.4
1.4
1.4
1.6
2.0
2.2
2.3
2.4
1.3
1.3
1.4
1.4
1.5
1.4
1.6
2.1
2.3
2.3
2.5
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1920
1921
1922
1923
1924
1925

1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970

1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
The dates along the top (and bottom) are those on which each portfolio
starts; those down the side are the dates to which the annual rate of
return is calculated. Thus the figure at the bottom right hand corner - 4.4 shows that the real return on a portfolio bought at the end of December
2009 and held for one year to December 2010 was 4.4%. Figures in
brackets indicate negative returns.
return up to the end of December 2010 from the year shown below the
figure. The first figure is 1.2, showing that the average annual rate of
return over the whole period since 1899 has been 1.2%.
57.5
42.0
28.8
22.4
18.2
15.3
15.0
13.9
12.1
13.1
12.2
14.7
13.7
14.6
13.2
12.2
10.4
9.8
8.7
8.4
8.4
8.1
7.8
7.6
7.9
8.0
6.9
6.5
5.8
5.6
4.7
4.3
4.6
4.5
3.9
3.6
3.2
3.5
3.4
3.1
2.7
3.1
3.1
2.9
2.8
2.7
2.7
2.5
2.3
2.2
2.5
2.2
1.8
1.1
1.2
1.2
1.6
1.4
1.2
1.3
1.1
1.7
1.8
1.8
1.8
1.9
2.1
2.1
2.0
1.9
2.1
2.3
2.6
2.3
2.5
2.5
2.7
2.9
2.8
2.8
2.8
2.9
2.8
2.8
2.8
2.8
2.7
2.8
2.8
2.8
28.0
16.5
12.5
10.0
8.3
9.1
8.7
7.5
9.0
8.5
11.4
10.7
11.9
10.6
9.6
8.0
7.5
6.5
6.3
6.4
6.2
5.9
5.9
6.2
6.3
5.3
5.0
4.3
4.2
3.3
3.0
3.3
3.2
2.6
2.4
2.0
2.3
2.3
2.0
1.6
2.1
2.1
1.8
1.8
1.8
1.7
1.5
1.4
1.3
1.6
1.3
0.9
0.3
0.4
0.4
0.8
0.7
0.4
0.5
0.3
0.9
1.1
1.1
1.1
1.2
1.4
1.4
1.4
1.3
1.5
1.6
2.0
1.7
1.9
1.9
2.1
2.3
2.2
2.3
2.3
2.3
2.3
2.3
2.3
2.2
2.2
2.3
2.3
2.3
6.0
5.5
4.5
3.8
5.7
5.8
4.8
6.8
6.5
9.9
9.2
10.6
9.3
8.4
6.7
6.3
5.4
5.2
5.3
5.2
5.0
5.0
5.3
5.5
4.5
4.2
3.5
3.4
2.5
2.2
2.5
2.5
1.9
1.7
1.3
1.7
1.7
1.4
1.0
1.5
1.5
1.3
1.3
1.2
1.2
1.0
0.9
0.8
1.1
0.8
0.4
(0.2)
(0.0)
(0.1)
0.4
0.2
0.0
0.1
(0.1)
0.5
0.7
0.7
0.8
0.9
1.0
1.1
1.0
0.9
1.1
1.3
1.6
1.4
1.6
1.6
1.8
2.0
1.9
2.0
2.0
2.0
2.0
2.0
2.1
2.0
2.0
2.1
2.0
2.0
4.9
3.8
3.1
5.6
5.8
4.6
6.9
6.6
10.3
9.6
11.0
9.6
8.6
6.8
6.4
5.3
5.2
5.3
5.2
4.9
4.9
5.3
5.5
4.5
4.1
3.4
3.3
2.4
2.1
2.4
2.4
1.8
1.6
1.2
1.6
1.6
1.3
0.9
1.4
1.4
1.2
1.1
1.1
1.1
0.9
0.8
0.7
1.0
0.7
0.3
(0.3)
(0.2)
(0.2)
0.3
0.1
(0.1)
(0.0)
(0.2)
0.4
0.6
0.6
0.7
0.8
1.0
1.0
0.9
0.9
1.0
1.2
1.6
1.3
1.5
1.6
1.7
2.0
1.9
1.9
1.9
2.0
1.9
2.0
2.0
1.9
1.9
2.0
2.0
2.0
2.7
2.2
5.9
6.0
4.6
7.3
6.8
11.0
10.1
11.7
10.0
8.9
6.9
6.5
5.4
5.2
5.3
5.2
4.9
4.9
5.3
5.5
4.4
4.1
3.4
3.3
2.3
2.0
2.3
2.3
1.7
1.5
1.1
1.5
1.5
1.2
0.8
1.3
1.3
1.1
1.1
1.0
1.0
0.8
0.7
0.6
0.9
0.7
0.2
(0.4)
(0.3)
(0.3)
0.2
0.0
(0.2)
(0.1)
(0.3)
0.4
0.5
0.5
0.6
0.7
0.9
0.9
0.9
0.8
1.0
1.2
1.5
1.3
1.5
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
2.0
1.8
7.5
7.1
5.0
8.2
7.5
12.2
11.1
12.7
10.8
9.5
7.3
6.8
5.5
5.4
5.5
5.4
5.0
5.0
5.4
5.7
4.5
4.1
3.4
3.3
2.3
2.0
2.3
2.3
1.7
1.4
1.0
1.4
1.4
1.1
0.7
1.2
1.3
1.0
1.0
1.0
1.0
0.8
0.7
0.5
0.9
0.6
0.2
(0.5)
(0.3)
(0.3)
0.2
(0.0)
(0.2)
(0.1)
(0.3)
0.3
0.5
0.5
0.6
0.7
0.9
0.9
0.8
0.8
1.0
1.2
1.5
1.3
1.4
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
1.9
13.6
9.9
6.2
9.9
8.7
14.1
12.5
14.2
11.9
10.3
7.8
7.2
5.8
5.6
5.7
5.6
5.2
5.2
5.6
5.9
4.6
4.2
3.5
3.4
2.3
2.0
2.4
2.3
1.7
1.4
1.0
1.4
1.4
1.1
0.7
1.2
1.2
1.0
1.0
1.0
1.0
0.7
0.6
0.5
0.9
0.6
0.2
(0.5)
(0.4)
(0.4)
0.1
(0.1)
(0.3)
(0.2)
(0.4)
0.3
0.5
0.5
0.6
0.7
0.8
0.9
0.8
0.8
1.0
1.2
1.5
1.3
1.4
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
2.0
6.4
2.6
8.7
7.6
14.2
12.3
14.3
11.6
10.0
7.3
6.6
5.2
5.0
5.2
5.1
4.7
4.7
5.2
5.5
4.2
3.8
3.0
2.9
1.9
1.5
1.9
2.0
1.3
1.0
0.6
1.1
1.1
0.7
0.3
0.9
0.9
0.7
0.7
0.7
0.7
0.5
0.3
0.2
0.6
0.3
(0.1)
(0.8)
(0.6)
(0.6)
(0.1)
(0.3)
(0.5)
(0.4)
(0.6)
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.6
0.6
0.8
1.0
1.3
1.1
1.3
1.3
1.5
1.8
1.7
1.7
1.7
1.8
1.7
1.8
1.8
1.7
1.7
1.9
1.8
1.8
(1.0)
9.9
8.0
16.2
13.5
15.6
12.4
10.4
7.4
6.7
5.1
4.9
5.1
5.0
4.6
4.6
5.1
5.4
4.1
3.7
2.9
2.8
1.7
1.3
1.8
1.8
1.1
0.8
0.4
0.9
0.9
0.6
0.2
0.7
0.8
0.6
0.5
0.5
0.5
0.3
0.2
0.1
0.5
0.2
(0.3)
(1.0)
(0.8)
(0.8)
(0.2)
(0.4)
(0.7)
(0.6)
(0.7)
(0.0)
0.1
0.2
0.3
0.4
0.6
0.6
0.5
0.5
0.7
0.9
1.2
1.0
1.2
1.3
1.4
1.7
1.6
1.7
1.7
1.7
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.8
21.9
12.7
22.6
17.4
19.3
14.8
12.2
8.5
7.5
5.8
5.5
5.6
5.4
5.1
5.0
5.5
5.8
4.4
3.9
3.1
3.0
1.8
1.4
1.9
1.9
1.2
0.9
0.5
0.9
0.9
0.6
0.2
0.8
0.8
0.6
0.6
0.6
0.6
0.3
0.2
0.1
0.5
0.2
(0.2)
(1.0)
(0.8)
(0.8)
(0.2)
(0.4)
(0.7)
(0.5)
(0.7)
(0.0)
0.2
0.2
0.3
0.4
0.6
0.6
0.6
0.5
0.7
0.9
1.3
1.0
1.2
1.3
1.5
1.7
1.6
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.7
1.8
1.8
1.8
4.3
23.0
16.0
18.6
13.4
10.6
6.7
5.9
4.1
4.0
4.3
4.2
3.9
3.9
4.5
4.9
3.5
3.0
2.2
2.1
1.0
0.6
1.1
1.1
0.4
0.2
(0.2)
0.3
0.3
(0.0)
(0.4)
0.2
0.2
0.0
0.0
0.0
0.0
(0.2)
(0.3)
(0.4)
0.0
(0.3)
(0.7)
(1.4)
(1.2)
(1.2)
(0.6)
(0.8)
(1.1)
(0.9)
(1.1)
(0.4)
(0.2)
(0.2)
(0.1)
0.0
0.2
0.3
0.2
0.2
0.4
0.6
1.0
0.7
0.9
1.0
1.2
1.5
1.4
1.4
1.4
1.5
1.5
1.5
1.6
1.5
1.5
1.6
1.5
1.6
45.0
22.3
23.8
15.9
12.0
7.1
6.1
4.1
3.9
4.3
4.2
3.8
3.9
4.6
4.9
3.4
2.9
2.1
2.0
0.8
0.4
1.0
1.0
0.3
0.0
(0.4)
0.1
0.2
(0.2)
(0.6)
0.1
0.1
(0.1)
(0.1)
(0.1)
(0.1)
(0.3)
(0.4)
(0.5)
(0.1)
(0.4)
(0.8)
(1.6)
(1.3)
(1.3)
(0.8)
(0.9)
(1.2)
(1.0)
(1.2)
(0.5)
(0.3)
(0.3)
(0.2)
(0.0)
0.2
0.2
0.2
0.1
0.3
0.6
0.9
0.7
0.9
1.0
1.2
1.4
1.3
1.4
1.4
1.5
1.4
1.5
1.5
1.4
1.4
1.6
1.5
1.5
3.2
14.4
7.5
4.9
0.8
0.7
(0.7)
(0.3)
0.5
0.8
0.7
1.0
2.0
2.5
1.1
0.8
(0.0)
0.0
(1.1)
(1.4)
(0.8)
(0.6)
(1.3)
(1.5)
(1.9)
(1.3)
(1.2)
(1.5)
(1.9)
(1.2)
(1.1)
(1.2)
(1.2)
(1.2)
(1.1)
(1.3)
(1.4)
(1.5)
(1.0)
(1.3)
(1.7)
(2.5)
(2.2)
(2.2)
(1.6)
(1.8)
(2.0)
(1.8)
(2.0)
(1.2)
(1.0)
(1.0)
(0.9)
(0.7)
(0.5)
(0.4)
(0.5)
(0.5)
(0.3)
(0.1)
0.3
0.1
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.0
0.9
1.0
1.1
1.0
1.1
26.9
9.7
5.5
0.2
0.2
(1.4)
(0.8)
0.2
0.5
0.5
0.8
1.9
2.5
0.9
0.6
(0.2)
(0.2)
(1.3)
(1.6)
(1.0)
(0.8)
(1.5)
(1.7)
(2.1)
(1.5)
(1.4)
(1.7)
(2.0)
(1.3)
(1.2)
(1.4)
(1.4)
(1.3)
(1.3)
(1.4)
(1.5)
(1.6)
(1.2)
(1.4)
(1.8)
(2.6)
(2.3)
(2.3)
(1.7)
(1.9)
(2.1)
(1.9)
(2.1)
(1.3)
(1.1)
(1.0)
(0.9)
(0.8)
(0.6)
(0.5)
(0.5)
(0.6)
(0.4)
(0.1)
0.3
0.0
0.3
0.3
0.6
0.9
0.8
0.8
0.8
0.9
0.9
0.9
1.0
0.9
0.9
1.1
1.0
1.0
(5.1)
(3.8)
(7.4)
(5.5)
(6.2)
(4.8)
(3.1)
(2.4)
(2.1)
(1.4)
(0.2)
0.7
(0.8)
(1.0)
(1.8)
(1.7)
(2.8)
(3.0)
(2.2)
(2.0)
(2.7)
(2.8)
(3.2)
(2.5)
(2.4)
(2.6)
(3.0)
(2.2)
(2.1)
(2.2)
(2.1)
(2.1)
(2.0)
(2.2)
(2.2)
(2.3)
(1.8)
(2.1)
(2.5)
(3.3)
(3.0)
(2.9)
(2.3)
(2.4)
(2.6)
(2.5)
(2.6)
(1.8)
(1.6)
(1.5)
(1.4)
(1.3)
(1.0)
(1.0)
(1.0)
(1.0)
(0.8)
(0.5)
(0.1)
(0.4)
(0.1)
(0.0)
0.2
0.5
0.4
0.5
0.5
0.6
0.6
0.6
0.7
0.6
0.6
0.7
0.7
0.7
(2.4)
(8.6) (14.4)
(5.7) (7.3)
(6.5) (7.9)
(4.7) (5.3)
(2.8) (2.9)
(2.0) (1.9)
(1.7) (1.6)
(1.0) (0.9)
0.3
0.7
1.2
1.6
(0.4) (0.3)
(0.7) (0.6)
(1.6) (1.5)
(1.4) (1.4)
(2.7) (2.7)
(2.9) (2.9)
(2.1) (2.1)
(1.9) (1.8)
(2.6) (2.6)
(2.7) (2.8)
(3.1) (3.1)
(2.4) (2.4)
(2.2) (2.2)
(2.5) (2.5)
(2.9) (2.9)
(2.1) (2.1)
(1.9) (1.9)
(2.1) (2.1)
(2.0) (2.0)
(2.0) (2.0)
(1.9) (1.9)
(2.1) (2.1)
(2.2) (2.1)
(2.2) (2.2)
(1.7) (1.7)
(2.0) (2.0)
(2.4) (2.4)
(3.2) (3.2)
(2.9) (2.9)
(2.9) (2.9)
(2.2) (2.2)
(2.4) (2.4)
(2.6) (2.6)
(2.4) (2.4)
(2.6) (2.6)
(1.8) (1.8)
(1.5) (1.5)
(1.5) (1.4)
(1.3) (1.3)
(1.2) (1.2)
(0.9) (0.9)
(0.9) (0.9)
(0.9) (0.9)
(0.9) (0.9)
(0.7) (0.7)
(0.4) (0.4)
(0.0)
0.0
(0.3) (0.2)
(0.0)
0.0
0.0
0.1
0.3
0.3
0.6
0.6
0.5
0.5
0.6
0.6
0.6
0.6
0.7
0.7
0.6
0.7
0.7
0.7
0.8
0.8
0.7
0.7
0.7
0.7
0.8
0.9
0.8
0.8
0.8
0.9
0.4
(4.4)
(2.1)
0.2
0.8
0.7
1.2
2.7
3.5
1.3
0.8
(0.4)
(0.3)
(1.8)
(2.1)
(1.2)
(1.1)
(1.9)
(2.1)
(2.5)
(1.8)
(1.6)
(2.0)
(2.4)
(1.5)
(1.4)
(1.6)
(1.6)
(1.5)
(1.4)
(1.7)
(1.7)
(1.8)
(1.3)
(1.6)
(2.1)
(2.9)
(2.6)
(2.6)
(1.9)
(2.1)
(2.3)
(2.1)
(2.3)
(1.5)
(1.2)
(1.2)
(1.0)
(0.9)
(0.6)
(0.6)
(0.6)
(0.6)
(0.4)
(0.1)
0.3
0.0
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.0
1.0
1.0
1.1
1.0
1.1
(9.0)
(3.3)
0.1
0.9
0.7
1.4
3.0
3.9
1.4
0.8
(0.4)
(0.3)
(1.9)
(2.3)
(1.4)
(1.1)
(2.0)
(2.2)
(2.7)
(1.9)
(1.7)
(2.1)
(2.5)
(1.6)
(1.5)
(1.7)
(1.6)
(1.6)
(1.5)
(1.7)
(1.8)
(1.9)
(1.4)
(1.6)
(2.1)
(3.0)
(2.7)
(2.6)
(1.9)
(2.1)
(2.4)
(2.2)
(2.4)
(1.5)
(1.3)
(1.2)
(1.1)
(0.9)
(0.6)
(0.6)
(0.6)
(0.7)
(0.4)
(0.1)
0.3
0.0
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.1
1.0
1.0
1.1
1.1
1.1
2.9
5.0
4.4
3.3
3.6
5.2
5.9
2.7
2.0
0.5
0.5
(1.3)
(1.8)
(0.8)
(0.6)
(1.6)
(1.8)
(2.3)
(1.5)
(1.4)
(1.7)
(2.2)
(1.3)
(1.2)
(1.4)
(1.3)
(1.3)
(1.2)
(1.5)
(1.6)
(1.6)
(1.1)
(1.4)
(1.9)
(2.8)
(2.5)
(2.5)
(1.7)
(1.9)
(2.2)
(2.0)
(2.2)
(1.3)
(1.1)
(1.0)
(0.9)
(0.7)
(0.5)
(0.4)
(0.4)
(0.5)
(0.2)
0.0
0.5
0.2
0.4
0.5
0.8
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.3
1.2
1.3
7.3
5.2
3.5
3.8
5.7
6.4
2.7
1.9
0.2
0.3
(1.7)
(2.1)
(1.1)
(0.8)
(1.9)
(2.1)
(2.6)
(1.7)
(1.6)
(2.0)
(2.5)
(1.5)
(1.3)
(1.6)
(1.5)
(1.4)
(1.4)
(1.6)
(1.7)
(1.8)
(1.2)
(1.5)
(2.1)
(3.0)
(2.6)
(2.6)
(1.9)
(2.1)
(2.3)
(2.1)
(2.3)
(1.4)
(1.2)
(1.1)
(1.0)
(0.8)
(0.5)
(0.5)
(0.5)
(0.6)
(0.3)
(0.0)
0.4
0.1
0.4
0.5
0.7
1.1
0.9
1.0
1.0
1.1
1.1
1.1
1.2
1.1
1.1
1.3
1.2
1.2
3.2
1.6
2.6
5.3
6.2
2.0
1.1
(0.6)
(0.5)
(2.6)
(2.9)
(1.7)
(1.4)
(2.5)
(2.7)
(3.2)
(2.2)
(2.1)
(2.4)
(2.9)
(1.9)
(1.7)
(1.9)
(1.9)
(1.8)
(1.7)
(1.9)
(2.0)
(2.1)
(1.5)
(1.8)
(2.3)
(3.3)
(2.9)
(2.9)
(2.1)
(2.3)
(2.6)
(2.4)
(2.5)
(1.6)
(1.4)
(1.3)
(1.1)
(1.0)
(0.7)
(0.6)
(0.7)
(0.7)
(0.4)
(0.2)
0.3
0.0
0.3
0.4
0.6
1.0
0.8
0.9
0.9
1.0
1.0
1.0
1.1
1.0
1.0
1.2
1.1
1.1
0.1
2.3
6.0
7.0
1.7
0.7
(1.2)
(0.9)
(3.2)
(3.5)
(2.2)
(1.8)
(2.9)
(3.1)
(3.6)
(2.6)
(2.4)
(2.7)
(3.2)
(2.1)
(1.9)
(2.2)
(2.1)
(2.0)
(1.9)
(2.1)
(2.2)
(2.3)
(1.7)
(2.0)
(2.5)
(3.5)
(3.1)
(3.1)
(2.3)
(2.5)
(2.7)
(2.5)
(2.7)
(1.7)
(1.5)
(1.4)
(1.2)
(1.1)
(0.8)
(0.7)
(0.7)
(0.8)
(0.5)
(0.2)
0.2
(0.0)
0.2
0.3
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.1
1.0
1.0
1.1
1.1
1.1
4.6
9.1
9.4
2.1
0.9
(1.4)
(1.1)
(3.6)
(3.9)
(2.4)
(2.0)
(3.1)
(3.4)
(3.9)
(2.7)
(2.5)
(2.9)
(3.4)
(2.2)
(2.0)
(2.3)
(2.2)
(2.1)
(2.0)
(2.2)
(2.3)
(2.3)
(1.7)
(2.0)
(2.6)
(3.6)
(3.2)
(3.1)
(2.3)
(2.5)
(2.8)
(2.6)
(2.8)
(1.8)
(1.5)
(1.4)
(1.3)
(1.1)
(0.8)
(0.7)
(0.8)
(0.8)
(0.5)
(0.2)
0.3
(0.0)
0.2
0.3
0.6
0.9
0.8
0.9
0.9
1.0
1.0
1.0
1.1
1.0
1.0
1.2
1.1
1.1
13.7
11.9
1.3
(0.0)
(2.5)
(2.0)
(4.7)
(4.9)
(3.1)
(2.6)
(3.8)
(4.0)
(4.5)
(3.2)
(3.0)
(3.3)
(3.9)
(2.6)
(2.4)
(2.6)
(2.5)
(2.3)
(2.2)
(2.5)
(2.6)
(2.6)
(1.9)
(2.3)
(2.8)
(3.9)
(3.4)
(3.4)
(2.5)
(2.7)
(3.0)
(2.8)
(3.0)
(1.9)
(1.7)
(1.6)
(1.4)
(1.2)
(0.9)
(0.8)
(0.9)
(0.9)
(0.6)
(0.3)
0.2
(0.1)
0.1
0.2
0.5
0.9
0.7
0.8
0.8
0.9
0.9
0.9
1.0
0.9
0.9
1.1
1.0
1.1
10.2
(4.3)
(4.2)
(6.2)
(4.9)
(7.4)
(7.3)
(5.0)
(4.3)
(5.4)
(5.5)
(5.9)
(4.4)
(4.1)
(4.4)
(4.9)
(3.5)
(3.2)
(3.4)
(3.2)
(3.1)
(2.9)
(3.1)
(3.2)
(3.2)
(2.5)
(2.8)
(3.4)
(4.4)
(4.0)
(3.9)
(3.0)
(3.2)
(3.4)
(3.2)
(3.4)
(2.3)
(2.0)
(1.9)
(1.8)
(1.6)
(1.2)
(1.2)
(1.2)
(1.2)
(0.9)
(0.6)
(0.1)
(0.4)
(0.1)
(0.0)
0.3
0.6
0.5
0.6
0.6
0.7
0.7
0.7
0.8
0.7
0.7
0.9
0.8
0.9
(16.9)
(10.7)
(11.1)
(8.3)
(10.6)
(10.0)
(7.0)
(5.9)
(7.0)
(6.9)
(7.2)
(5.6)
(5.1)
(5.3)
(5.8)
(4.3)
(3.9)
(4.1)
(3.9)
(3.7)
(3.5)
(3.7)
(3.7)
(3.7)
(3.0)
(3.3)
(3.9)
(4.9)
(4.4)
(4.3)
(3.4)
(3.6)
(3.8)
(3.6)
(3.7)
(2.7)
(2.3)
(2.2)
(2.0)
(1.8)
(1.5)
(1.4)
(1.4)
(1.5)
(1.2)
(0.8)
(0.3)
(0.6)
(0.3)
(0.2)
0.1
0.5
0.3
0.4
0.5
0.6
0.5
0.6
0.7
0.6
0.6
0.8
0.7
0.8
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1936
The top figure in each column is the rate of return in the first year, so that
reading diagonally down the table gives the real rate of return in each
year since 1899. The table can be used to see the rate of return over any
period; thus a purchase made at the end of 1900 would have lost 1.0% of
its value in one year (allowing for reinvestment of income) but, over the
first five years (up to the end of 1905), would have given an average
annual real return of 0.4%.
(4.0)
(8.1) (12.0)
(5.2) (5.8)
(9.0) (10.6)
(8.5) (9.6)
(5.3) (5.5)
(4.3) (4.3)
(5.7) (5.9)
(5.7) (5.9)
(6.2) (6.4)
(4.4) (4.5)
(4.0) (4.0)
(4.4) (4.4)
(4.9) (5.0)
(3.4) (3.3)
(3.1) (3.0)
(3.3) (3.2)
(3.1) (3.0)
(2.9) (2.9)
(2.8) (2.7)
(3.0) (3.0)
(3.1) (3.0)
(3.1) (3.1)
(2.4) (2.3)
(2.7) (2.6)
(3.3) (3.3)
(4.4) (4.4)
(3.9) (3.9)
(3.9) (3.8)
(2.9) (2.9)
(3.1) (3.1)
(3.4) (3.4)
(3.1) (3.1)
(3.3) (3.3)
(2.2) (2.2)
(1.9) (1.8)
(1.8) (1.7)
(1.6) (1.6)
(1.4) (1.3)
(1.1) (1.0)
(1.0) (0.9)
(1.0) (0.9)
(1.1) (1.0)
(0.8) (0.7)
(0.4) (0.3)
0.1
0.2
(0.2) (0.1)
0.1
0.2
0.2
0.3
0.5
0.5
0.8
0.9
0.7
0.8
0.8
0.9
0.8
0.9
0.9
1.0
0.9
1.0
0.9
1.0
1.0
1.1
0.9
1.0
0.9
1.0
1.1
1.2
1.0
1.1
1.1
1.2
0.8
(9.8) (19.3)
(8.8) (13.3)
(3.8) (5.3)
(2.7) (3.5)
(4.9) (6.0)
(5.0) (6.0)
(5.7) (6.6)
(3.6) (4.2)
(3.2) (3.6)
(3.7) (4.1)
(4.4) (4.9)
(2.6) (2.9)
(2.3) (2.5)
(2.6) (2.8)
(2.5) (2.7)
(2.3) (2.5)
(2.2) (2.3)
(2.5) (2.6)
(2.6) (2.7)
(2.6) (2.8)
(1.8) (1.9)
(2.2) (2.4)
(2.9) (3.1)
(4.1) (4.3)
(3.6) (3.8)
(3.5) (3.7)
(2.5) (2.6)
(2.8) (2.9)
(3.1) (3.2)
(2.8) (2.9)
(3.0) (3.1)
(1.9) (1.9)
(1.5) (1.6)
(1.4) (1.5)
(1.2) (1.3)
(1.0) (1.1)
(0.7) (0.7)
(0.6) (0.7)
(0.7) (0.7)
(0.7) (0.8)
(0.4) (0.4)
(0.1) (0.1)
0.5
0.5
0.1
0.1
0.4
0.4
0.5
0.5
0.8
0.8
1.2
1.2
1.1
1.1
1.2
1.2
1.2
1.2
1.3
1.3
1.2
1.2
1.3
1.3
1.3
1.4
1.2
1.3
1.2
1.3
1.4
1.4
1.3
1.3
1.4
1.4
(6.7)
2.6
2.4
(2.3)
(3.0)
(4.3)
(1.8)
(1.4)
(2.3)
(3.3)
(1.2)
(1.0)
(1.5)
(1.4)
(1.2)
(1.2)
(1.6)
(1.7)
(1.8)
(1.0)
(1.5)
(2.3)
(3.6)
(3.1)
(3.0)
(1.9)
(2.2)
(2.6)
(2.3)
(2.5)
(1.3)
(1.0)
(0.9)
(0.7)
(0.5)
(0.2)
(0.1)
(0.1)
(0.2)
0.1
0.4
1.0
0.6
0.9
1.0
1.3
1.7
1.6
1.7
1.6
1.7
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.8
12.8
7.3
(0.7)
(2.1)
(3.8)
(0.9)
(0.7)
(1.7)
(2.9)
(0.7)
(0.5)
(1.0)
(0.9)
(0.8)
(0.8)
(1.2)
(1.4)
(1.6)
(0.7)
(1.2)
(2.0)
(3.5)
(2.9)
(2.8)
(1.7)
(2.0)
(2.4)
(2.1)
(2.4)
(1.1)
(0.8)
(0.7)
(0.5)
(0.3)
0.0
0.1
0.0
(0.1)
0.3
0.6
1.2
0.8
1.1
1.2
1.5
1.9
1.7
1.8
1.8
1.9
1.8
1.9
2.0
1.8
1.8
2.0
1.9
1.9
2.0
(6.9) (15.0)
(6.6) (10.6)
(7.6) (10.6)
(3.5) (4.8)
(2.7) (3.7)
(3.6) (4.5)
(4.7) (5.6)
(2.1) (2.6)
(1.7) (2.1)
(2.2) (2.6)
(2.0) (2.4)
(1.8) (2.1)
(1.7) (1.9)
(2.1) (2.4)
(2.2) (2.5)
(2.3) (2.6)
(1.4) (1.6)
(1.9) (2.1)
(2.7) (3.0)
(4.2) (4.5)
(3.6) (3.8)
(3.5) (3.7)
(2.3) (2.5)
(2.6) (2.8)
(2.9) (3.1)
(2.7) (2.8)
(2.9) (3.1)
(1.6) (1.7)
(1.2) (1.3)
(1.1) (1.2)
(0.9) (1.0)
(0.7) (0.8)
(0.3) (0.4)
(0.3) (0.3)
(0.3) (0.4)
(0.4) (0.4)
(0.0) (0.1)
0.3
0.3
0.9
0.9
0.5
0.5
0.9
0.8
1.0
0.9
1.3
1.2
1.7
1.7
1.5
1.5
1.6
1.6
1.6
1.6
1.7
1.7
1.6
1.6
1.7
1.7
1.8
1.8
1.6
1.6
1.6
1.6
1.8
1.8
1.7
1.7
1.8
1.8
(6.0)
(8.2) (10.4)
(1.1)
1.5
(0.6)
1.3
(2.3) (1.3)
(3.9) (3.5)
(0.7)
0.3
(0.4)
0.5
(1.1) (0.4)
(1.0) (0.4)
(0.9) (0.3)
(0.8) (0.3)
(1.3) (0.9)
(1.5) (1.2)
(1.7) (1.4)
(0.6) (0.3)
(1.3) (1.0)
(2.3) (2.0)
(3.9) (3.8)
(3.2) (3.1)
(3.1) (3.0)
(1.9) (1.7)
(2.2) (2.0)
(2.6) (2.5)
(2.3) (2.2)
(2.6) (2.4)
(1.2) (1.0)
(0.8) (0.6)
(0.7) (0.5)
(0.5) (0.3)
(0.3) (0.1)
0.1
0.3
0.2
0.4
0.1
0.3
0.0
0.2
0.4
0.6
0.7
0.9
1.3
1.6
0.9
1.1
1.3
1.5
1.4
1.5
1.7
1.9
2.1
2.3
1.9
2.1
2.0
2.2
2.0
2.2
2.1
2.3
2.0
2.2
2.0
2.2
2.1
2.3
2.0
2.2
2.0
2.1
2.1
2.3
2.0
2.2
2.1
2.2
14.9
7.7
1.9
(1.7)
2.5
2.4
1.1
0.9
0.9
0.8
(0.0)
(0.4)
(0.7)
0.5
(0.3)
(1.5)
(3.3)
(2.7)
(2.6)
(1.2)
(1.6)
(2.1)
(1.8)
(2.1)
(0.6)
(0.2)
(0.1)
0.1
0.3
0.7
0.7
0.7
0.5
0.9
1.3
1.9
1.4
1.8
1.9
2.2
2.6
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
0.9
(4.0) (8.7)
(6.7) (10.3) (11.9)
(0.3) (0.7)
3.5
0.1 (0.1)
2.9
(1.1) (1.5)
0.4
(0.9) (1.3)
0.3
(0.8) (1.0)
0.3
(0.7) (0.9)
0.3
(1.4) (1.7) (0.8)
(1.7) (1.9) (1.1)
(1.9) (2.1) (1.4)
(0.5) (0.7)
0.1
(1.3) (1.5) (0.9)
(2.5) (2.7) (2.3)
(4.4) (4.7) (4.4)
(3.6) (3.9) (3.6)
(3.5) (3.7) (3.4)
(2.0) (2.2) (1.8)
(2.4) (2.6) (2.2)
(2.8) (3.0) (2.7)
(2.5) (2.6) (2.3)
(2.8) (2.9) (2.7)
(1.2) (1.3) (0.9)
(0.8) (0.8) (0.5)
(0.6) (0.7) (0.4)
(0.4) (0.5) (0.2)
(0.2) (0.2)
0.1
0.2
0.2
0.5
0.3
0.3
0.6
0.2
0.2
0.5
0.1
0.1
0.4
0.5
0.5
0.8
0.9
0.9
1.2
1.6
1.6
1.9
1.1
1.1
1.4
1.5
1.5
1.8
1.6
1.6
1.9
1.9
1.9
2.2
2.3
2.4
2.7
2.1
2.2
2.5
2.2
2.3
2.6
2.2
2.2
2.5
2.3
2.3
2.6
2.2
2.2
2.5
2.2
2.3
2.5
2.3
2.4
2.6
2.2
2.2
2.5
2.2
2.2
2.4
2.3
2.4
2.6
2.2
2.3
2.5
2.3
2.3
2.5
21.5
11.2
4.9
3.6
3.0
2.5
0.9
0.3
(0.2)
1.4
0.2
(1.4)
(3.8)
(2.9)
(2.8)
(1.1)
(1.6)
(2.2)
(1.8)
(2.2)
(0.4)
0.1
0.2
0.4
0.6
1.0
1.1
1.0
0.8
1.2
1.7
2.4
1.8
2.2
2.3
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.8
3.0
2.8
2.9
1.8
(2.6)
(1.8)
(1.2)
(0.9)
(2.1)
(2.4)
(2.6)
(0.6)
(1.7)
(3.3)
(5.7)
(4.6)
(4.4)
(2.4)
(2.9)
(3.4)
(2.9)
(3.3)
(1.4)
(0.8)
(0.7)
(0.5)
(0.2)
0.3
0.4
0.3
0.2
0.6
1.1
1.8
1.3
1.7
1.8
2.1
2.6
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
(6.7)
(3.5)
(2.2)
(1.6)
(2.9)
(3.1)
(3.2)
(0.9)
(2.1)
(3.7)
(6.4)
(5.1)
(4.8)
(2.7)
(3.2)
(3.7)
(3.2)
(3.6)
(1.5)
(1.0)
(0.8)
(0.6)
(0.3)
0.2
0.3
0.2
0.1
0.6
1.0
1.8
1.3
1.7
1.8
2.1
2.7
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
(0.1)
0.2
0.2
(1.9)
(2.4)
(2.6)
(0.1)
(1.5)
(3.4)
(6.3)
(5.0)
(4.7)
(2.4)
(2.9)
(3.5)
(3.0)
(3.4)
(1.2)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.6
0.5
0.4
0.8
1.3
2.1
1.5
2.0
2.1
2.4
2.9
2.7
2.8
2.7
2.8
2.7
2.8
2.8
2.7
2.6
2.8
2.7
2.7
0.5
0.3
(2.5)
(2.9)
(3.1)
(0.1)
(1.7)
(3.8)
(7.0)
(5.4)
(5.1)
(2.6)
(3.1)
(3.7)
(3.2)
(3.6)
(1.3)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.7
0.6
0.4
0.9
1.4
2.2
1.6
2.0
2.1
2.5
3.0
2.8
2.9
2.8
2.9
2.8
2.8
2.9
2.7
2.7
2.9
2.7
2.8
0.1
(4.0)
(4.0)
(4.0)
(0.2)
(2.0)
(4.4)
(7.9)
(6.1)
(5.6)
(2.9)
(3.4)
(4.1)
(3.4)
(3.8)
(1.4)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.4
2.3
1.6
2.1
2.2
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.7
2.9
2.8
2.8
(7.8)
(6.1)
(5.4)
(0.3)
(2.4)
(5.1)
(9.0)
(6.8)
(6.2)
(3.2)
(3.8)
(4.4)
(3.7)
(4.1)
(1.5)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.5
2.3
1.7
2.1
2.2
2.7
3.2
2.9
3.0
3.0
3.1
3.0
3.0
3.0
2.9
2.8
3.0
2.9
2.9
(4.2)
(4.1) (4.0)
2.4
5.9 16.8
(1.0)
0.0
2.1 (10.7)
(4.6) (4.7) (4.9) (14.2) (17.6)
(9.1) (10.1) (11.6) (19.4) (23.4) (28.8)
(6.7) (7.1) (7.7) (13.0) (13.7) (11.7)
(6.0) (6.3) (6.6) (10.7) (10.7) (8.3)
(2.6) (2.4) (2.2) (5.1) (3.9) (0.1)
(3.3) (3.2) (3.1) (5.7) (4.8) (2.1)
(4.1) (4.1) (4.1) (6.4) (5.8) (3.6)
(3.4) (3.3) (3.2) (5.2) (4.5) (2.5)
(3.8) (3.8) (3.8) (5.6) (5.0) (3.3)
(1.0) (0.8) (0.5) (1.9) (1.0)
1.0
(0.3) (0.0)
0.3 (1.0) (0.1)
1.9
(0.2)
0.1
0.4 (0.8)
0.1
1.9
0.1
0.4
0.7 (0.4)
0.5
2.2
0.5
0.8
1.1
0.1
0.9
2.5
1.1
1.4
1.7
0.8
1.6
3.2
1.1
1.4
1.7
0.9
1.7
3.1
1.0
1.3
1.6
0.8
1.5
2.8
0.8
1.0
1.3
0.6
1.2
2.5
1.3
1.6
1.9
1.2
1.8
3.1
1.9
2.2
2.5
1.8
2.5
3.7
2.8
3.1
3.4
2.8
3.5
4.7
2.1
2.3
2.6
2.0
2.7
3.7
2.5
2.8
3.1
2.6
3.2
4.2
2.6
2.9
3.2
2.7
3.3
4.3
3.0
3.3
3.6
3.1
3.7
4.7
3.6
3.9
4.2
3.7
4.3
5.3
3.3
3.6
3.8
3.4
4.0
4.9
3.4
3.7
3.9
3.5
4.1
5.0
3.3
3.6
3.8
3.4
3.9
4.8
3.4
3.7
3.9
3.5
4.0
4.9
3.3
3.5
3.7
3.4
3.8
4.7
3.3
3.5
3.7
3.4
3.8
4.6
3.4
3.6
3.8
3.4
3.9
4.7
3.1
3.4
3.6
3.2
3.7
4.4
3.1
3.3
3.5
3.2
3.6
4.3
3.3
3.5
3.7
3.4
3.8
4.5
3.1
3.3
3.5
3.2
3.6
4.3
3.2
3.4
3.6
3.2
3.6
4.3
1947
1949
1951
1952
1953
1955
1957
1958
1961
1962
1963
1964
1965
1966
1967
1968
1948
1950
1954
1956
1959
1960
1969
1970
1971
1972
1973
9.5
4.1
11.8
6.1
2.4
2.8
1.0
5.5
6.0
5.6
5.6
5.7
6.2
5.9
5.4
4.8
5.3
5.9
6.8
5.7
6.1
6.1
6.5
7.1
6.6
6.5
6.3
6.3
6.1
6.0
6.0
5.6
5.5
5.7
5.4
5.4
(1.1)
13.0
5.0
0.7
1.5
(0.4)
5.0
5.6
5.2
5.2
5.3
5.9
5.6
5.1
4.5
5.1
5.6
6.7
5.5
6.0
5.9
6.3
7.0
6.4
6.4
6.2
6.2
5.9
5.9
5.9
5.5
5.4
5.6
5.3
5.3
29.1
8.1 (9.4)
1.3 (10.3) (11.2)
2.2 (5.5) (3.4)
(0.2) (6.4) (5.4)
6.0
1.9
5.0
6.6
3.2
6.0
6.0
3.1
5.3
5.9
3.3
5.3
6.0
3.7
5.5
6.6
4.5
6.2
6.2
4.3
5.8
5.6
3.8
5.1
4.9
3.3
4.4
5.5
4.0
5.1
6.1
4.7
5.8
7.2
5.9
7.1
5.9
4.7
5.6
6.4
5.2
6.2
6.3
5.2
6.1
6.7
5.7
6.6
7.4
6.4
7.3
6.8
5.9
6.6
6.7
5.9
6.6
6.5
5.6
6.4
6.5
5.7
6.4
6.2
5.4
6.1
6.1
5.3
6.0
6.1
5.4
6.0
5.7
5.0
5.6
5.6
4.9
5.4
5.8
5.1
5.6
5.5
4.8
5.3
5.5
4.8
5.3
5.0
(2.3)
11.1
10.8
9.0
8.3
8.1
8.6
7.9
6.9
5.9
6.6
7.2
8.5
6.8
7.4
7.2
7.7
8.3
7.6
7.6
7.2
7.2
6.8
6.7
6.7
6.3
6.1
6.3
5.9
5.9
(9.2)
14.2
12.8
10.0
9.0
8.7
9.1
8.3
7.1
6.0
6.7
7.4
8.8
7.0
7.5
7.4
7.8
8.5
7.8
7.7
7.3
7.3
6.9
6.8
6.7
6.3
6.1
6.3
6.0
5.9
43.6
25.7
17.3
14.1
12.6
12.5
11.0
9.4
7.9
8.4
9.1
10.4
8.3
8.8
8.6
9.0
9.7
8.8
8.6
8.2
8.2
7.7
7.5
7.5
7.0
6.7
6.9
6.5
6.5
10.0
6.0
5.7
6.0
7.2
6.4
5.2
4.1
5.1
6.1
7.8
5.8
6.5
6.4
7.0
7.8
7.0
7.0
6.6
6.6
6.3
6.1
6.1
5.7
5.5
5.7
5.4
5.3
2.1
3.6
4.7
6.5
5.7
4.4
3.3
4.5
5.7
7.6
5.4
6.2
6.1
6.8
7.7
6.8
6.8
6.5
6.5
6.1
5.9
6.0
5.5
5.3
5.5
5.2
5.2
5.0
6.0
8.0
6.6
4.9
3.4
4.9
6.1
8.2
5.8
6.6
6.5
7.1
8.1
7.2
7.1
6.7
6.7
6.3
6.1
6.1
5.6
5.4
5.7
5.3
5.3
7.0
9.5
7.1
4.8
3.1
4.8
6.3
8.6
5.9
6.8
6.6
7.3
8.4
7.3
7.2
6.8
6.8
6.3
6.2
6.2
5.7
5.5
5.7
5.3
5.3
12.1
7.2
4.2
2.2
4.4
6.2
8.9
5.7
6.7
6.6
7.3
8.5
7.4
7.3
6.8
6.8
6.3
6.2
6.2
5.6
5.4
5.7
5.3
5.2
2.4
0.4
(0.9)
2.6
5.0
8.3
4.8
6.1
6.0
6.9
8.1
7.0
6.9
6.4
6.5
6.0
5.8
5.8
5.3
5.1
5.4
5.0
4.9
(1.7)
(2.5)
2.6
5.7
9.5
5.2
6.6
6.4
7.4
8.7
7.4
7.3
6.8
6.7
6.2
6.0
6.0
5.4
5.2
5.5
5.1
5.1
(3.4)
4.8
8.3
12.5
6.7
8.1
7.6
8.6
10.0
8.3
8.1
7.5
7.4
6.8
6.6
6.5
5.9
5.6
5.9
5.4
5.4
13.8
14.6
18.4
9.4
10.5
9.6
10.4
11.7
9.7
9.4
8.5
8.4
7.6
7.3
7.2
6.5
6.1
6.5
5.9
5.8
15.4
20.8
7.9
9.7
8.8
9.8
11.5
9.2
8.9
8.0
7.9
7.1
6.8
6.8
6.0
5.7
6.0
5.5
5.4
1974
1975
1976
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1977
1978
26.4
4.4 (13.8)
7.9 (0.3)
7.2
1.5
8.8
4.7
10.8
7.9
8.4
5.6
8.1
5.7
7.2
5.0
7.2
5.2
6.4
4.6
6.1
4.5
6.1
4.6
5.4
3.9
5.1
3.7
5.5
4.2
4.9
3.7
4.9
3.8
1992
1993
15.3
10.1
11.8
14.2
10.0
9.3
8.1
7.9
6.8
6.5
6.5
5.5
5.2
5.6
5.0
5.0
5.1
10.1
13.8
8.7
8.2
6.9
6.9
5.8
5.6
5.6
4.7
4.4
4.9
4.3
4.3
15.3
18.4
9.9
9.0
7.3
7.2
5.9
5.6
5.7
4.6
4.3
4.9
4.3
4.3
21.7
7.4
7.0
5.3
5.6
4.4
4.3
4.5
3.5
3.3
4.0
3.4
3.5
(5.2)
0.3
0.4
1.9
1.3
1.7
2.3
1.4
1.4
2.4
1.9
2.1
6.1
3.3
4.4
3.0
3.1
3.6
2.4
2.3
3.3
2.6
2.8
0.6
3.6
2.0
2.4
3.1
1.8
1.7
2.9
2.2
2.4
6.7
2.7
3.0
3.7
2.1
1.9
3.3
2.4
2.6
(1.2)
1.2
2.8
0.9
1.0
2.7
1.8
2.2
3.6
4.8
1.7
1.5
3.5
2.3
2.6
6.0
0.7
0.9
3.5
2.1
2.5
(4.4)
(1.7)
2.6
1.1
1.8
1.2
6.4
3.0
3.4
11.8
4.0
4.1
(3.3)
0.5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
4.4 2010
2009

1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
US real return on equities - gross income re-invested

1926 11.2
1927 24.0 38.2
1928 29.9 40.4 42.5
9.4 (16.1)
1929 16.4 18.2
6.6
5.5 (3.6) (20.7) (25.1)
1930
1931 (3.2) (5.9) (14.5) (27.9) (33.2)
1932 (2.6) (4.8) (11.6) (21.5) (23.3)
1933
3.6
2.5 (2.5) (9.6) (7.9)
3.5
2.5 (1.7) (7.6) (5.8)
1934
1935
6.9
6.4
3.0 (1.7)
0.9
8.9
8.7
5.8
2.0
4.8
1936
4.0
3.3
0.4 (3.5) (1.8)
1937
6.0
5.5
3.0 (0.3)
1.6
1938
5.7
5.3
2.9 (0.1)
1.6
1939
4.6
4.2
1.9 (0.9)
0.7
1940
1941
3.0
2.5
0.3 (2.4) (1.1)
3.2
2.8
0.8 (1.7) (0.5)
1942
1943
4.4
4.0
2.2 (0.1)
1.2
5.1
4.8
3.1
1.0
2.3
1944
1945
6.5
6.3
4.8
2.9
4.2
5.1
4.8
3.2
1.4
2.5
1946
4.6
4.3
2.8
1.1
2.1
1947
4.3
4.0
2.6
1.0
1.9
1948
5.1
4.8
3.5
1.9
2.9
1949
5.8
5.6
4.3
2.9
3.9
1950
1951
6.1
5.9
4.8
3.4
4.3
6.4
6.2
5.1
3.7
4.7
1952
1953
6.1
5.9
4.8
3.6
4.5
7.5
7.4
6.4
5.2
6.1
1954
1955
8.0
7.9
7.0
5.9
6.8
8.0
7.9
6.9
5.9
6.8
1956
7.2
7.1
6.2
5.1
6.0
1957
8.2
8.1
7.3
6.2
7.1
1958
8.3
8.2
7.4
6.4
7.2
1959
8.0
7.9
7.1
6.2
7.0
1960
1961
8.5
8.4
7.7
6.8
7.6
7.9
7.8
7.0
6.2
6.9
1962
1963
8.2
8.1
7.4
6.5
7.3
8.4
8.3
7.6
6.8
7.5
1964
1965
8.5
8.4
7.7
6.9
7.6
7.9
7.8
7.2
6.4
7.0
1966
8.3
8.2
7.6
6.8
7.5
1967
8.3
8.3
7.6
6.9
7.5
1968
7.7
7.6
7.0
6.2
6.9
1969
7.4
7.3
6.7
6.0
6.6
1970
1971
7.5
7.4
6.8
6.1
6.7
7.6
7.6
7.0
6.3
6.9
1972
1973
6.8
6.7
6.1
5.4
6.0
5.7
5.6
5.0
4.3
4.8
1974
1975
6.1
6.0
5.4
4.8
5.3
6.4
6.3
5.8
5.1
5.6
1976
6.1
6.0
5.4
4.8
5.3
1977
6.0
5.9
5.3
4.7
5.1
1978
6.0
6.0
5.4
4.8
5.3
1979
6.3
6.2
5.7
5.1
5.5
1980
1981
5.9
5.8
5.3
4.7
5.2
6.1
6.0
5.5
4.9
5.4
1982
1983
6.3
6.2
5.7
5.2
5.6
6.2
6.1
5.6
5.1
5.5
1984
1985
6.5
6.4
6.0
5.4
5.8
6.7
6.6
6.1
5.6
6.0
1986
6.5
6.4
6.0
5.4
5.8
1987
6.6
6.5
6.1
5.6
6.0
1988
6.8
6.8
6.3
5.8
6.2
1989
6.5
6.5
6.0
5.5
5.9
1990
1991
6.9
6.8
6.4
5.9
6.3
6.9
6.8
6.4
5.9
6.3
1992
1993
6.9
6.8
6.4
5.9
6.3
6.7
6.7
6.2
5.8
6.2
1994
1995
7.1
7.0
6.6
6.1
6.5
7.2
7.2
6.8
6.3
6.7
1996
7.5
7.4
7.0
6.6
7.0
1997
7.7
7.6
7.2
6.8
7.2
1998
7.8
7.8
7.4
7.0
7.4
1999
7.5
7.5
7.1
6.7
7.0
2000
2001
7.2
7.2
6.8
6.4
6.7
6.8
6.7
6.3
5.9
6.3
2002
2003
7.0
7.0
6.6
6.2
6.6
7.1
7.0
6.7
6.3
6.6
2004
2005
7.0
7.0
6.6
6.2
6.6
7.1
7.1
6.7
6.3
6.7
2006
7.1
7.0
6.7
6.3
6.6
2007
6.3
6.3
5.9
5.6
5.9
2008
6.6
6.5
6.2
5.8
6.1
2009
6.7
6.6
6.3
5.9
6.2
2010

(40.4)
(22.4)
(1.3)
(0.3)
7.1
10.9
2.1
5.5
5.1
3.7
1.4
1.9
3.5
4.6
6.5
4.6
4.0
3.7
4.7
5.6
6.0
6.3
6.0
7.7
8.3
8.2
7.3
8.5
8.6
8.3
8.8
8.1
8.4
8.6
8.8
8.1
8.6
8.6
7.8
7.5
7.6
7.8
6.8
5.6
6.1
6.4
6.0
5.9
6.0
6.3
5.9
6.1
6.3
6.2
6.5
6.7
6.5
6.6
6.9
6.5
6.9
6.9
6.9
6.7
7.1
7.3
7.5
7.7
7.9
7.6
7.3
6.8
7.1
7.1
7.1
7.1
7.1
6.3
6.6
6.7
1.0
27.0
18.3
24.0
25.5
11.7
14.5
12.9
10.2
6.9
7.0
8.4
9.2
11.0
8.6
7.7
7.1
8.0
8.8
9.1
9.3
8.8
10.5
11.1
10.8
9.8
10.9
10.9
10.5
11.0
10.2
10.5
10.6
10.7
10.0
10.4
10.3
9.5
9.1
9.2
9.3
8.3
7.0
7.5
7.8
7.4
7.2
7.3
7.5
7.1
7.3
7.5
7.3
7.7
7.8
7.6
7.7
7.9
7.6
7.9
7.9
7.9
7.7
8.1
8.2
8.5
8.7
8.9
8.5
8.2
7.6
7.9
8.0
7.9
8.0
7.9
7.1
7.4
7.5
59.6
28.0
32.8
32.5
14.0
16.9
14.7
11.4
7.6
7.6
9.1
9.9
11.8
9.1
8.1
7.5
8.4
9.2
9.5
9.7
9.2
10.9
11.5
11.3
10.2
11.3
11.3
10.9
11.4
10.5
10.8
10.9
11.0
10.2
10.7
10.6
9.8
9.4
9.4
9.6
8.5
7.1
7.6
7.9
7.5
7.3
7.4
7.7
7.2
7.4
7.6
7.4
7.8
7.9
7.7
7.8
8.1
7.7
8.1
8.0
8.0
7.8
8.2
8.3
8.6
8.8
9.0
8.6
8.3
7.7
8.0
8.1
8.0
8.1
8.0
7.2
7.5
7.6
2.7
21.1
24.6
4.8
9.9
8.5
5.9
2.4
3.0
5.0
6.3
8.6
6.0
5.1
4.7
5.8
6.8
7.3
7.6
7.1
9.0
9.7
9.5
8.5
9.7
9.8
9.4
10.0
9.1
9.5
9.7
9.7
9.0
9.5
9.5
8.6
8.2
8.4
8.5
7.5
6.1
6.6
7.0
6.5
6.4
6.5
6.8
6.3
6.5
6.8
6.6
7.0
7.1
6.9
7.0
7.3
7.0
7.3
7.3
7.3
7.1
7.5
7.7
8.0
8.2
8.4
8.0
7.7
7.1
7.4
7.5
7.4
7.5
7.4
6.6
6.9
7.0
42.9
37.2 31.7
5.4 (9.4) (37.7)
11.8
3.0 (9.0)
9.7
2.7 (5.4)
6.4
0.3 (6.3)
2.4 (3.1) (8.9)
3.0 (1.7) (6.4)
5.3
1.4 (2.4)
6.6
3.2
0.1
9.1
6.2
3.7
6.3
3.4
1.0
5.3
2.7
0.4
4.9
2.4
0.3
6.0
3.8
1.9
7.1
5.1
3.4
7.5
5.7
4.1
7.8
6.1
4.6
7.4
5.7
4.3
9.3
7.8
6.6
10.1
8.6
7.6
9.9
8.5
7.4
8.7
7.4
6.3
10.0
8.8
7.8
10.1
8.9
8.0
9.6
8.5
7.6
10.2
9.1
8.3
9.4
8.3
7.5
9.7
8.7
7.9
9.9
8.9
8.2
10.0
9.0
8.3
9.2
8.3
7.6
9.7
8.8
8.1
9.7
8.8
8.1
8.8
8.0
7.3
8.4
7.6
6.9
8.5
7.7
7.1
8.7
7.9
7.3
7.6
6.8
6.2
6.2
5.4
4.8
6.7
5.9
5.3
7.1
6.3
5.7
6.6
5.9
5.3
6.5
5.8
5.2
6.6
5.9
5.3
6.8
6.2
5.6
6.4
5.7
5.2
6.6
5.9
5.4
6.8
6.2
5.7
6.7
6.1
5.6
7.1
6.5
6.0
7.2
6.6
6.2
7.0
6.4
6.0
7.1
6.5
6.1
7.4
6.8
6.4
7.0
6.5
6.1
7.4
6.9
6.5
7.4
6.9
6.5
7.4
6.9
6.5
7.2
6.7
6.3
7.6
7.1
6.7
7.8
7.3
6.9
8.1
7.6
7.2
8.3
7.8
7.4
8.5
8.0
7.7
8.1
7.6
7.3
7.7
7.3
6.9
7.2
6.7
6.4
7.5
7.1
6.7
7.5
7.1
6.8
7.5
7.1
6.7
7.6
7.1
6.8
7.5
7.1
6.8
6.7
6.3
6.0
7.0
6.5
6.2
7.1
6.7
6.4
portfolio starts; those down the side are the dates to which the
annual rate of return is calculated. Thus the figure at the bottom right
hand corner - 16.5 - shows that the real return on a portfolio bought
at the end of December 2009 and held for one year to December 2010
was 16.5%.Figures in brackets indicate negative returns.
33.1
16.5
2.0
7.4 (3.5) (8.8)
0.2 (8.9) (13.9) (18.7)
1.6 (5.1) (7.3) (6.6)
5.2
0.4
0.0
3.1
7.2
3.4
3.6
7.0
10.5
7.6
8.6 12.5
6.5
3.6
3.8
6.1
5.3
2.6
2.7
4.4
4.7
2.2
2.3
3.7
6.2
4.0
4.2
5.8
7.5
5.6
5.9
7.5
8.0
6.3
6.6
8.2
8.3
6.7
7.1
8.6
7.7
6.2
6.5
7.8
10.0
8.7
9.2 10.6
10.9
9.7 10.2 11.6
10.6
9.4
9.9 11.2
9.2
8.1
8.5
9.6
10.7
9.7 10.1 11.3
10.7
9.7 10.1 11.2
10.2
9.3
9.6 10.6
10.9 10.0 10.4 11.4
9.8
9.0
9.3 10.2
10.2
9.4
9.7 10.6
10.4
9.6
9.9 10.8
10.5
9.7 10.0 10.9
9.6
8.9
9.1
9.9
10.1
9.4
9.7 10.4
10.1
9.4
9.7 10.4
9.1
8.4
8.7
9.3
8.7
8.0
8.2
8.8
8.8
8.1
8.3
8.9
8.9
8.3
8.5
9.1
7.8
7.1
7.3
7.8
6.2
5.6
5.7
6.1
6.8
6.2
6.3
6.8
7.2
6.6
6.7
7.2
6.7
6.1
6.2
6.7
6.6
6.0
6.1
6.5
6.7
6.1
6.2
6.6
6.9
6.4
6.5
6.9
6.5
5.9
6.0
6.4
6.7
6.2
6.2
6.6
6.9
6.4
6.5
6.9
6.8
6.3
6.4
6.7
7.2
6.7
6.8
7.2
7.3
6.8
6.9
7.3
7.1
6.6
6.7
7.1
7.2
6.8
6.9
7.2
7.5
7.1
7.2
7.5
7.1
6.7
6.8
7.1
7.5
7.1
7.2
7.5
7.5
7.1
7.2
7.5
7.5
7.1
7.2
7.5
7.3
6.9
7.0
7.3
7.7
7.3
7.4
7.7
7.9
7.5
7.6
7.9
8.2
7.8
7.9
8.2
8.4
8.0
8.1
8.4
8.6
8.2
8.4
8.7
8.2
7.8
7.9
8.2
7.8
7.5
7.6
7.9
7.3
6.9
7.0
7.3
7.6
7.3
7.3
7.6
7.6
7.3
7.4
7.7
7.6
7.2
7.3
7.6
7.7
7.3
7.4
7.7
7.6
7.3
7.4
7.6
6.8
6.4
6.5
6.7
7.0
6.7
6.8
7.0
7.2
6.8
6.9
7.1
7.3
16.1
17.2
21.9
11.9
8.9
7.4
9.3
10.9
11.3
11.4
10.4
13.3
14.1
13.5
11.6
13.3
13.2
12.4
13.1
11.8
12.1
12.3
12.3
11.2
11.7
11.6
10.5
9.9
10.0
10.1
8.8
7.0
7.6
8.0
7.5
7.3
7.4
7.7
7.1
7.3
7.6
7.4
7.8
8.0
7.7
7.9
8.2
7.7
8.1
8.1
8.1
7.9
8.3
8.5
8.8
9.0
9.2
8.8
8.4
7.8
8.1
8.1
8.1
8.2
8.1
7.2
7.4
7.6
25.7
22.6
27.3
13.1
9.2
7.4
9.6
11.4
11.8
11.9
10.7
13.8
14.7
14.0
11.9
13.7
13.6
12.7
13.4
12.0
12.4
12.5
12.5
11.4
11.9
11.8
10.6
10.0
10.1
10.2
8.8
7.0
7.6
8.0
7.5
7.3
7.4
7.7
7.1
7.3
7.6
7.4
7.8
8.0
7.7
7.9
8.2
7.7
8.1
8.1
8.1
7.9
8.3
8.5
8.8
9.0
9.2
8.8
8.4
7.8
8.1
8.1
8.1
8.2
8.1
7.2
7.5
7.6
19.5
28.0
9.2
5.4
4.1
7.1
9.5
10.1
10.4
9.3
12.8
13.8
13.1
11.0
13.0
12.8
12.0
12.8
11.3
11.7
11.9
12.0
10.8
11.4
11.3
10.1
9.5
9.6
9.7
8.3
6.4
7.1
7.5
7.0
6.8
6.9
7.2
6.7
6.9
7.2
7.0
7.4
7.6
7.4
7.5
7.8
7.4
7.8
7.8
7.8
7.6
8.0
8.2
8.5
8.7
9.0
8.5
8.1
7.5
7.9
7.9
7.8
7.9
7.8
6.9
7.2
7.3
return up to the end of December 2010 from the year shown below
the figure. The first figure is 6.7, showing that the average annual rate
of return over the whole period since 1925 has been 6.7%.
37.2
4.3
1.1
0.6
4.8
7.9
8.8
9.3
8.2
12.1
13.3
12.6
10.4
12.5
12.4
11.6
12.4
10.9
11.3
11.6
11.6
10.4
11.0
11.0
9.7
9.1
9.2
9.4
7.9
6.0
6.7
7.2
6.6
6.4
6.6
6.9
6.3
6.6
6.9
6.7
7.2
7.3
7.1
7.2
7.6
7.1
7.6
7.5
7.6
7.3
7.8
8.0
8.3
8.6
8.8
8.3
7.9
7.3
7.7
7.7
7.6
7.7
7.7
6.7
7.0
7.2
(20.7)
(13.2) (5.1)
(9.3) (3.0) (0.9)
(2.0)
5.2 10.7
2.8
9.7 15.1
4.7 10.7 15.1
5.9 11.1 14.6
5.0
9.3 11.9
9.6 14.1 17.2
11.1 15.4 18.2
10.6 14.3 16.7
8.4 11.5 13.3
10.8 13.9 15.8
10.8 13.7 15.4
10.0 12.6 14.1
11.0 13.5 15.0
9.5 11.8 13.0
10.1 12.2 13.4
10.3 12.4 13.5
10.5 12.4 13.5
9.3 11.0 11.9
10.0 11.7 12.6
9.9 11.6 12.4
8.7 10.2 10.9
8.1
9.5 10.2
8.3
9.6 10.3
8.5
9.8 10.4
7.0
8.2
8.8
5.1
6.2
6.6
5.8
6.9
7.4
6.3
7.4
7.8
5.8
6.8
7.2
5.6
6.6
7.0
5.8
6.7
7.1
6.1
7.1
7.4
5.6
6.4
6.8
5.9
6.7
7.1
6.2
7.0
7.4
6.0
6.8
7.2
6.5
7.3
7.7
6.7
7.5
7.8
6.5
7.2
7.6
6.6
7.4
7.7
7.0
7.7
8.1
6.5
7.2
7.6
7.0
7.7
8.0
7.0
7.7
8.0
7.0
7.7
8.0
6.8
7.5
7.8
7.3
7.9
8.2
7.5
8.1
8.4
7.8
8.5
8.8
8.1
8.7
9.0
8.3
9.0
9.3
7.9
8.5
8.8
7.5
8.1
8.3
6.8
7.4
7.6
7.2
7.8
8.0
7.3
7.8
8.1
7.2
7.7
8.0
7.3
7.8
8.1
7.2
7.8
8.0
6.3
6.8
7.0
6.6
7.1
7.3
6.7
7.2
7.5
23.6
24.1
20.9
18.9
14.7
20.5
21.2
19.2
15.0
17.7
17.0
15.5
16.3
14.0
14.4
14.5
14.4
12.7
13.4
13.2
11.5
10.7
10.8
10.9
9.2
6.9
7.7
8.2
7.5
7.2
7.3
7.7
7.1
7.3
7.6
7.4
7.9
8.1
7.8
7.9
8.3
7.8
8.2
8.2
8.2
7.9
8.4
8.6
9.0
9.2
9.5
9.0
8.5
7.8
8.2
8.2
8.1
8.2
8.2
7.1
7.5
7.6
24.5
19.6
17.3
12.5
19.9
20.9
18.5
14.0
17.0
16.4
14.8
15.7
13.3
13.8
13.9
13.8
12.1
12.8
12.6
11.0
10.1
10.3
10.4
8.6
6.3
7.1
7.6
7.0
6.7
6.8
7.2
6.6
6.9
7.2
7.0
7.5
7.7
7.4
7.6
7.9
7.4
7.9
7.9
7.9
7.6
8.1
8.3
8.7
8.9
9.2
8.7
8.2
7.5
7.9
8.0
7.9
8.0
7.9
6.9
7.2
7.3
14.9
13.9
8.8
18.7
20.1
17.6
12.5
16.1
15.5
13.8
15.0
12.5
13.0
13.2
13.1
11.4
12.2
12.0
10.3
9.5
9.6
9.8
8.0
5.6
6.5
7.0
6.4
6.1
6.3
6.7
6.0
6.4
6.7
6.5
7.1
7.3
7.0
7.1
7.5
7.0
7.5
7.5
7.5
7.3
7.8
8.0
8.4
8.6
8.9
8.4
7.9
7.2
7.6
7.7
7.6
7.7
7.6
6.6
6.9
7.1
12.9
5.9 (0.7)
20.1 23.8
21.5 24.5
18.1 19.5
12.2 12.0
16.3 16.9
15.6 16.0
13.7 13.8
15.0 15.2
12.2 12.2
12.8 12.8
13.0 13.1
13.0 13.0
11.1 11.0
12.0 11.9
11.8 11.8
10.0
9.9
9.2
9.0
9.4
9.2
9.6
9.4
7.7
7.4
5.2
4.9
6.1
5.8
6.7
6.5
6.1
5.8
5.8
5.5
6.0
5.7
6.4
6.2
5.8
5.5
6.1
5.9
6.5
6.3
6.2
6.0
6.8
6.7
7.0
6.9
6.8
6.6
6.9
6.8
7.3
7.2
6.8
6.7
7.4
7.2
7.3
7.2
7.4
7.2
7.1
7.0
7.6
7.5
7.8
7.7
8.3
8.2
8.5
8.4
8.8
8.7
8.3
8.2
7.8
7.7
7.1
7.0
7.5
7.4
7.5
7.4
7.5
7.4
7.6
7.5
7.5
7.4
6.4
6.3
6.8
6.7
7.0
6.9
54.4
39.4
27.0
15.4
20.7
19.0
16.1
17.4
13.7
14.3
14.4
14.2
12.0
12.9
12.7
10.6
9.6
9.8
10.0
7.8
5.1
6.2
6.8
6.1
5.8
6.0
6.5
5.7
6.1
6.5
6.3
6.9
7.1
6.8
7.0
7.4
6.9
7.4
7.4
7.4
7.2
7.7
7.9
8.4
8.6
8.9
8.4
7.9
7.1
7.6
7.6
7.5
7.7
7.6
6.5
6.8
7.0
25.8
15.2
5.5
4.8 (4.4) (13.4)
13.5
9.7 11.8
13.0 10.0 11.6
10.7
7.9
8.5
12.9 10.8 11.9
9.4
7.3
7.6
10.5
8.7
9.2
11.0
9.5 10.0
11.2
9.8 10.3
9.0
7.6
7.8
10.2
9.0
9.3
10.1
9.0
9.3
8.1
7.0
7.1
7.2
6.1
6.2
7.6
6.5
6.6
7.9
6.9
7.0
5.8
4.8
4.8
3.1
2.1
1.9
4.3
3.3
3.2
5.0
4.1
4.0
4.3
3.5
3.4
4.2
3.3
3.2
4.4
3.6
3.5
5.0
4.2
4.2
4.3
3.5
3.4
4.7
4.0
3.9
5.2
4.5
4.5
5.0
4.3
4.3
5.6
5.0
5.0
5.9
5.3
5.3
5.6
5.1
5.0
5.8
5.3
5.3
6.3
5.8
5.8
5.8
5.2
5.2
6.4
5.9
5.9
6.4
5.9
5.9
6.4
6.0
6.0
6.2
5.7
5.7
6.8
6.3
6.4
7.0
6.6
6.6
7.5
7.1
7.1
7.8
7.4
7.4
8.1
7.7
7.7
7.5
7.2
7.2
7.1
6.7
6.7
6.3
5.9
6.0
6.8
6.4
6.4
6.8
6.5
6.5
6.8
6.4
6.4
6.9
6.6
6.6
6.8
6.5
6.5
5.7
5.4
5.4
6.1
5.8
5.8
6.3
6.0
6.0
The top figure in each column is the rate of return in the first year, so
that reading diagonally down the table gives the real rate of return in
each year since 1925. The table can be used to see the rate of return
over any period; thus a purchase made at the end of 1926 would have
gained 38.1% in value in one year (allowing for reinvestment of
income) but, over the first five years (up to the end of 1931), would
have fallen in value by an average annual real rate of -5.7%.
44.5
26.6
16.9
19.4
12.3
13.5
13.8
13.7
10.5
11.9
11.7
9.0
7.8
8.2
8.6
6.0
2.8
4.2
5.1
4.3
4.1
4.4
5.0
4.2
4.7
5.2
5.0
5.7
6.0
5.7
6.0
6.5
5.9
6.5
6.5
6.6
6.3
6.9
7.2
7.7
8.0
8.3
7.7
7.2
6.4
6.9
7.0
6.9
7.0
7.0
5.8
6.2
6.4
11.0
5.2 (0.3)
12.0 12.5
5.5
3.7
8.2
7.5
9.4
9.0
9.8
9.6
6.8
6.2
8.8
8.5
8.8
8.6
6.2
5.8
5.2
4.7
5.8
5.4
6.4
6.0
3.8
3.4
0.7
0.0
2.2
1.7
3.2
2.8
2.5
2.1
2.4
1.9
2.8
2.4
3.5
3.1
2.7
2.4
3.3
3.0
3.9
3.6
3.7
3.4
4.5
4.3
4.9
4.6
4.6
4.4
4.9
4.7
5.4
5.2
4.8
4.6
5.5
5.4
5.6
5.4
5.7
5.5
5.4
5.2
6.1
5.9
6.4
6.2
6.9
6.8
7.2
7.1
7.6
7.5
7.0
6.9
6.5
6.4
5.7
5.6
6.2
6.1
6.3
6.2
6.2
6.1
6.4
6.3
6.3
6.2
5.1
5.0
5.6
5.5
5.8
5.7
26.9
5.8 (11.9)
10.2
2.6 19.6
11.5
6.8 17.6 15.6
11.7
8.2 15.9 14.1 12.6
7.4
3.8
8.2
4.6 (0.5) (12.1)
9.8
7.2 11.5
9.5
7.6
5.1
9.7
7.5 11.1
9.5
8.0
6.5
6.5
4.2
6.7
4.7
2.6
0.3
5.2
3.1
5.1
3.2
1.2 (0.9)
5.9
4.0
5.9
4.4
2.8
1.3
6.6
4.9
6.7
5.4
4.2
3.0
3.6
1.9
3.3
1.8
0.3 (1.1)
0.1 (1.8) (0.9) (2.5) (4.2) (5.9)
1.8
0.2
1.2 (0.2) (1.5) (2.8)
3.0
1.5
2.6
1.4
0.3 (0.8)
2.2
0.8
1.7
0.6 (0.5) (1.5)
2.1
0.8
1.6
0.5 (0.5) (1.4)
2.5
1.3
2.1
1.1
0.2 (0.6)
3.3
2.2
3.0
2.1
1.4
0.6
2.5
1.4
2.2
1.3
0.5 (0.2)
3.1
2.1
2.9
2.1
1.3
0.7
3.8
2.8
3.6
2.8
2.2
1.7
3.6
2.7
3.4
2.7
2.1
1.5
4.5
3.6
4.3
3.7
3.2
2.7
4.8
4.0
4.8
4.2
3.7
3.2
4.5
3.8
4.4
3.9
3.4
3.0
4.8
4.1
4.8
4.2
3.8
3.4
5.4
4.7
5.4
4.9
4.5
4.2
4.8
4.1
4.8
4.2
3.8
3.5
5.6
4.9
5.6
5.1
4.7
4.4
5.6
5.0
5.6
5.1
4.8
4.5
5.7
5.1
5.7
5.2
4.9
4.6
5.4
4.8
5.4
5.0
4.6
4.4
6.1
5.6
6.1
5.7
5.4
5.2
6.4
5.9
6.5
6.1
5.8
5.6
7.0
6.5
7.0
6.7
6.4
6.2
7.3
6.8
7.4
7.1
6.8
6.7
7.7
7.2
7.8
7.5
7.2
7.1
7.1
6.6
7.1
6.8
6.6
6.4
6.5
6.1
6.6
6.2
6.0
5.8
5.7
5.2
5.7
5.4
5.1
4.9
6.2
5.8
6.3
6.0
5.7
5.5
6.3
5.9
6.4
6.0
5.8
5.7
6.3
5.8
6.3
6.0
5.8
5.6
6.4
6.0
6.5
6.2
6.0
5.8
6.4
5.9
6.4
6.1
5.9
5.7
5.1
4.7
5.1
4.8
4.6
4.4
5.6
5.2
5.6
5.3
5.1
4.9
5.8
5.4
5.8
5.5
5.3
5.1
25.7
17.2
4.8
2.1
4.2
5.8
0.6
(5.1)
(1.7)
0.4
(0.5)
(0.5)
0.3
1.6
0.6
1.6
2.5
2.3
3.5
4.1
3.8
4.2
4.9
4.2
5.1
5.2
5.3
5.0
5.9
6.2
6.9
7.3
7.7
7.0
6.4
5.4
6.1
6.2
6.1
6.3
6.2
4.8
5.3
5.6
9.4
(4.4)
(4.7)
(0.6)
2.2
(3.1)
(8.8)
(4.7)
(2.0)
(2.8)
(2.6)
(1.5)
(0.0)
(0.9)
0.1
1.2
1.1
2.4
3.1
2.8
3.2
4.1
3.3
4.4
4.4
4.6
4.3
5.2
5.6
6.3
6.8
7.2
6.5
5.9
4.9
5.6
5.7
5.6
5.8
5.8
4.4
4.9
5.1
(16.4)
(11.0)
(3.7)
0.5
(5.4)
(11.6)
(6.5)
(3.4)
(4.1)
(3.7)
(2.5)
(0.8)
(1.7)
(0.5)
0.7
0.6
2.0
2.7
2.4
2.9
3.8
3.1
4.2
4.2
4.4
4.1
5.1
5.5
6.2
6.7
7.1
6.4
5.8
4.8
5.5
5.6
5.5
5.7
5.7
4.2
4.8
5.0
(5.3)
3.4
6.8
(2.5)
(10.6)
(4.8)
(1.4)
(2.4)
(2.2)
(0.9)
0.8
(0.4)
0.9
2.1
1.9
3.3
4.0
3.6
4.1
5.0
4.1
5.2
5.2
5.4
5.0
6.0
6.4
7.1
7.6
8.0
7.2
6.5
5.5
6.2
6.3
6.2
6.4
6.3
4.8
5.4
5.6
12.9
13.4
(1.5)
(11.8)
(4.7)
(0.7)
(2.0)
(1.8)
(0.4)
1.4
0.1
1.4
2.7
2.4
3.9
4.6
4.1
4.6
5.6
4.6
5.7
5.7
5.9
5.5
6.5
6.9
7.6
8.1
8.5
7.7
7.0
5.9
6.6
6.6
6.6
6.8
6.7
5.1
5.7
5.9
13.9
(8.0)
(18.8)
(8.6)
(3.2)
(4.3)
(3.7)
(2.0)
0.2
(1.1)
0.4
1.8
1.6
3.3
4.0
3.6
4.2
5.2
4.2
5.4
5.4
5.6
5.2
6.2
6.6
7.4
7.9
8.4
7.5
6.8
5.6
6.4
6.5
6.4
6.6
6.5
4.9
5.5
5.7
(25.7)
(31.4)
(15.1)
(7.1)
(7.5)
(6.4)
(4.1)
(1.4)
(2.6)
(0.9)
0.8
0.7
2.5
3.4
3.0
3.6
4.7
3.7
4.9
5.0
5.2
4.8
5.9
6.4
7.2
7.7
8.2
7.3
6.5
5.4
6.1
6.2
6.2
6.4
6.3
4.7
5.3
5.5
(36.7)
(9.3)
0.1
(2.3)
(1.9)
0.1
2.7
0.7
2.4
3.9
3.5
5.3
6.0
5.4
5.9
6.9
5.7
7.0
6.9
7.0
6.5
7.6
8.0
8.8
9.3
9.7
8.8
7.9
6.7
7.4
7.5
7.4
7.5
7.4
5.7
6.3
6.5
30.1
25.9
12.9
9.4
9.7
11.3
7.6
8.7
9.8
8.7
10.3
10.7
9.6
9.9
10.7
9.2
10.3
10.1
10.0
9.3
10.4
10.7
11.4
11.8
12.2
11.0
10.1
8.7
9.4
9.4
9.2
9.3
9.1
7.3
7.9
8.1
21.9
5.1 (9.4)
3.3 (4.9) (0.3)
5.1
0.0
5.1
7.9
4.7
9.8
4.3
1.1
3.9
6.0
3.5
6.3
7.5
5.6
8.3
6.6
4.8
7.0
8.5
7.1
9.4
9.1
7.9 10.0
8.1
6.9
8.7
8.4
7.4
9.1
9.5
8.6 10.2
7.9
7.0
8.3
9.2
8.4
9.8
9.0
8.3
9.6
9.0
8.3
9.5
8.3
7.6
8.7
9.5
8.8
9.9
9.8
9.3 10.3
10.6 10.1 11.2
11.1 10.6 11.6
11.5 11.1 12.1
10.3
9.9 10.8
9.4
8.9
9.7
7.9
7.4
8.2
8.7
8.2
9.0
8.7
8.3
9.0
8.6
8.1
8.8
8.7
8.3
9.0
8.6
8.1
8.8
6.7
6.2
6.8
7.3
6.9
7.4
7.5
7.1
7.7
10.8
15.3
5.3
8.0
10.2
8.2
10.9
11.3
9.7
10.0
11.2
9.1
10.6
10.3
10.2
9.3
10.6
11.0
11.8
12.3
12.7
11.3
10.2
8.5
9.4
9.4
9.2
9.3
9.1
7.0
7.7
7.9
19.9
2.6 (12.2)
7.1
1.3
10.0
6.9
7.7
4.9
10.9
9.1
11.4 10.1
9.6
8.2
10.0
8.8
11.3 10.3
8.9
7.9
10.6
9.8
10.3
9.5
10.2
9.4
9.2
8.5
10.6 10.0
11.0 10.4
11.9 11.4
12.3 11.9
12.8 12.5
11.4 11.0
10.1
9.7
8.4
7.9
9.3
8.9
9.3
8.9
9.1
8.7
9.3
8.9
9.1
8.7
6.9
6.5
7.6
7.2
7.8
7.5
16.8
17.9
11.3
15.2
15.1
12.0
12.1
13.5
10.4
12.3
11.7
11.5
10.3
11.8
12.1
13.1
13.5
14.0
12.3
10.9
9.0
9.9
9.9
9.7
9.8
9.6
7.2
7.9
8.2
19.0
8.6 (0.8)
14.7 12.6
14.7 13.3
11.0
9.1
11.4
9.9
13.1 12.1
9.6
8.3
11.8 10.9
11.2 10.4
11.0 10.2
9.7
8.9
11.4 10.8
11.8 11.3
12.9 12.4
13.3 13.0
13.9 13.5
12.1 11.7
10.6 10.2
8.6
8.1
9.6
9.2
9.6
9.2
9.4
9.0
9.5
9.2
9.3
8.9
6.9
6.4
7.6
7.2
7.9
7.5
27.9
21.1
12.7
12.8
14.9
9.9
12.7
11.9
11.5
9.9
11.9
12.4
13.5
14.0
14.6
12.5
10.9
8.6
9.7
9.7
9.4
9.6
9.3
6.7
7.5
7.9
14.7
5.8 (2.5)
8.2
5.0
11.9 10.9
6.7
4.7
10.4
9.5
9.8
8.9
9.6
8.9
8.1
7.3
10.4
9.9
11.0 10.7
12.4 12.2
13.0 12.9
13.7 13.6
11.6 11.3
9.9
9.6
7.6
7.2
8.8
8.5
8.8
8.5
8.6
8.3
8.8
8.5
8.6
8.3
5.9
5.5
6.8
6.4
7.1
6.8
13.1
18.3
7.3
12.7
11.4
11.0
8.8
11.6
12.3
13.8
14.4
15.1
12.5
10.5
7.8
9.2
9.2
8.9
9.2
8.8
5.9
6.8
7.2
23.7
4.5 (11.8)
12.6
7.4
11.0
7.0
10.5
7.5
8.1
5.2
11.4
9.4
12.1 10.6
13.9 12.7
14.5 13.6
15.2 14.4
12.4 11.5
10.3
9.2
7.5
6.3
8.9
7.9
9.0
8.1
8.7
7.8
8.9
8.1
8.6
7.8
5.6
4.7
6.6
5.8
7.0
6.2
30.8
17.9
14.8
9.9
14.2
14.8
16.7
17.2
17.8
14.1
11.4
8.0
9.6
9.6
9.2
9.5
9.1
5.7
6.8
7.2
6.2
7.5
3.7
10.4
11.9
14.5
15.4
16.2
12.4
9.6
6.1
8.0
8.2
7.8
8.2
7.9
4.4
5.6
6.1
8.8
2.5 (3.4)
11.9 13.5
13.3 14.9
16.3 18.2
17.0 18.7
17.7 19.3
13.2 13.8
10.0 10.1
6.1
5.8
8.2
8.1
8.3
8.3
8.0
7.9
8.4
8.3
8.0
8.0
4.2
3.9
5.5
5.3
6.1
6.0
33.3
25.3
26.4
25.0
24.4
17.0
12.2
7.0
9.5
9.5
9.0
9.4
8.9
4.5
5.9
6.6
17.7
23.1
22.3
22.3
14.0
9.0
3.7
6.8
7.2
6.8
7.4
7.1
2.5
4.2
5.0
28.8
24.7 20.7
23.9 21.5 22.4
13.0
8.3
2.5 (14.1)
7.3
2.6 (2.9) (13.4) (12.8)
1.6 (3.1) (8.3) (16.7) (18.0) (23.0)
5.4
1.9 (1.5) (6.7) (4.1)
0.6
5.9
3.0
0.3 (3.6) (0.8)
3.5
5.7
3.1
0.8 (2.4)
0.1
3.6
6.4
4.2
2.3 (0.3)
2.3
5.6
6.1
4.1
2.4
0.2
2.4
5.2
1.4 (0.8) (2.7) (5.2) (4.0) (2.7)
3.3
1.4 (0.2) (2.2) (0.8)
0.8
4.1
2.5
1.1 (0.7)
0.8
2.4
31.4
20.0
9.7
14.4
6.7
3.9
14.2
9.0
8.6 13.6
11.9
7.5
6.8
8.3
3.2
1.2 (4.0) (7.1) (10.5) (20.6) (38.9)
4.7
0.8 (0.8) (2.0) (6.7) (11.3)
6.1
2.9
1.9
1.5 (1.4) (2.8)
28.7
22.4
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
16.5 2010
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
US real return on bonds - gross income re-invested

8.8
10.1
7.1
5.9
7.1
6.7
9.7
8.3
8.3
7.7
7.5
6.6
6.8
6.7
6.6
5.6
4.9
4.6
4.4
4.6
3.5
2.8
2.7
3.0
2.6
2.1
2.1
2.1
2.3
2.2
1.8
1.9
1.6
1.5
1.7
1.7
1.8
1.7
1.7
1.6
1.6
1.4
1.2
0.9
1.0
1.2
1.3
1.0
0.8
0.8
1.0
0.9
0.7
0.4
0.2
0.0
0.5
0.5
0.7
1.0
1.4
1.2
1.3
1.5
1.4
1.6
1.7
1.8
1.7
2.0
1.9
2.1
2.2
2.0
2.2
2.2
2.3
2.3
2.3
2.4
2.3
2.3
2.6
2.3
2.4
11.3
6.2
1.3
5.0
2.0
2.7
6.6
5.1
7.1 11.7
6.2
5.0
6.3
8.1
4.6
9.9
9.6 11.8 15.0 16.6 30.0
8.3
7.8
9.1 10.8 10.5 13.6 (0.8)
8.3
7.8
9.0 10.3
9.9 11.8
3.7
8.3
7.5
7.1
7.9
8.9
8.3
9.2
3.1
5.1
1.9
7.4
7.0
7.7
8.4
7.9
8.5
3.8
5.3
3.9
6.4
6.0
6.5
7.0
6.3
6.6
2.5
3.3
1.7
6.6
6.2
6.7
7.1
6.6
6.9
3.4
4.3
3.3
6.5
6.2
6.6
7.0
6.5
6.7
3.8
4.6
3.8
6.5
6.1
6.5
6.9
6.4
6.6
4.0
4.7
4.1
5.4
5.0
5.3
5.5
5.0
5.0
2.5
3.0
2.2
4.7
4.3
4.5
4.6
4.1
4.0
1.7
2.0
1.2
4.4
3.9
4.1
4.2
3.7
3.6
1.5
1.7
1.0
4.1
3.7
3.9
4.0
3.4
3.4
1.4
1.6
1.0
4.4
4.0
4.1
4.2
3.8
3.7
1.9
2.1
1.6
3.3
2.9
2.9
3.0
2.4
2.3
0.6
0.7
0.1
2.6
2.1
2.2
2.2
1.6
1.4 (0.2) (0.2) (0.8)
2.5
2.1
2.1
2.1
1.6
1.4 (0.2) (0.1) (0.7)
2.7
2.4
2.4
2.4
1.9
1.8
0.3
0.4 (0.1)
2.4
2.0
2.0
2.0
1.5
1.4 (0.0)
0.0 (0.5)
1.9
1.5
1.5
1.5
1.0
0.8 (0.5) (0.5) (1.0)
1.8
1.5
1.5
1.4
1.0
0.8 (0.5) (0.5) (0.9)
1.9
1.5
1.5
1.5
1.1
0.9 (0.3) (0.3) (0.7)
2.1
1.7
1.8
1.7
1.3
1.2
0.0
0.1 (0.3)
2.0
1.6
1.7
1.6
1.2
1.1 (0.0)
0.0 (0.3)
1.6
1.3
1.3
1.2
0.8
0.7 (0.4) (0.4) (0.7)
1.7
1.4
1.4
1.3
1.0
0.8 (0.2) (0.1) (0.5)
1.4
1.1
1.1
1.1
0.7
0.6 (0.4) (0.4) (0.8)
1.3
1.0
0.9
0.9
0.5
0.4 (0.6) (0.6) (0.9)
1.5
1.3
1.3
1.2
0.9
0.8 (0.2) (0.1) (0.4)
1.5
1.2
1.2
1.2
0.8
0.7 (0.2) (0.1) (0.4)
1.6
1.4
1.4
1.3
1.0
0.9
0.0
0.1 (0.2)
1.5
1.3
1.3
1.2
0.9
0.8 (0.0) (0.0) (0.3)
1.6
1.3
1.3
1.3
1.0
0.9
0.1
0.1 (0.2)
1.5
1.2
1.2
1.2
0.9
0.8
0.0
0.0 (0.2)
1.4
1.2
1.2
1.2
0.9
0.8
0.0
0.0 (0.2)
1.2
0.9
0.9
0.9
0.6
0.5 (0.2) (0.2) (0.5)
1.0
0.8
0.8
0.7
0.4
0.3 (0.4) (0.4) (0.6)
0.7
0.5
0.5
0.4
0.1
0.0 (0.7) (0.7) (0.9)
0.8
0.6
0.6
0.5
0.3
0.2 (0.5) (0.5) (0.7)
1.1
0.9
0.9
0.8
0.6
0.5 (0.2) (0.2) (0.4)
1.1
0.9
0.9
0.8
0.6
0.5 (0.2) (0.1) (0.4)
0.9
0.6
0.6
0.6
0.3
0.2 (0.4) (0.4) (0.6)
0.7
0.5
0.4
0.4
0.1
0.0 (0.6) (0.6) (0.8)
0.6
0.4
0.4
0.4
0.1
0.0 (0.6) (0.6) (0.8)
0.9
0.7
0.6
0.6
0.4
0.3 (0.3) (0.3) (0.5)
0.7
0.5
0.5
0.5
0.3
0.2 (0.4) (0.4) (0.6)
0.5
0.3
0.3
0.3
0.0 (0.1) (0.6) (0.6) (0.8)
0.3
0.1
0.0 (0.0) (0.2) (0.3) (0.9) (0.9) (1.1)
(0.0) (0.2) (0.2) (0.3) (0.5) (0.6) (1.2) (1.2) (1.4)
(0.1) (0.3) (0.3) (0.4) (0.6) (0.7) (1.3) (1.3) (1.5)
0.4
0.2
0.2
0.1 (0.1) (0.2) (0.7) (0.7) (0.9)
0.4
0.2
0.1
0.1 (0.1) (0.2) (0.7) (0.7) (0.9)
0.5
0.3
0.3
0.3
0.1
0.0 (0.5) (0.5) (0.7)
0.9
0.7
0.7
0.7
0.5
0.4 (0.1) (0.0) (0.2)
1.2
1.1
1.1
1.0
0.9
0.8
0.3
0.3
0.2
1.1
1.0
0.9
0.9
0.7
0.7
0.2
0.2
0.1
1.2
1.0
1.0
1.0
0.8
0.7
0.3
0.3
0.1
1.3
1.2
1.2
1.2
1.0
0.9
0.5
0.5
0.4
1.3
1.2
1.2
1.2
1.0
0.9
0.5
0.5
0.4
1.5
1.4
1.4
1.4
1.2
1.1
0.7
0.7
0.6
1.6
1.4
1.4
1.4
1.2
1.2
0.8
0.8
0.7
1.7
1.6
1.6
1.6
1.4
1.4
1.0
1.0
0.9
1.6
1.4
1.4
1.4
1.3
1.2
0.8
0.8
0.7
1.9
1.8
1.8
1.7
1.6
1.6
1.2
1.2
1.1
1.8
1.7
1.7
1.7
1.5
1.5
1.1
1.1
1.0
2.0
1.8
1.8
1.8
1.7
1.6
1.3
1.3
1.2
2.1
2.0
2.0
2.0
1.8
1.8
1.4
1.4
1.3
1.9
1.8
1.8
1.8
1.6
1.6
1.2
1.2
1.1
2.1
2.0
2.0
2.0
1.8
1.8
1.4
1.5
1.4
2.1
2.0
2.0
2.0
1.8
1.8
1.4
1.5
1.4
2.2
2.1
2.1
2.1
2.0
2.0
1.6
1.6
1.6
2.2
2.1
2.1
2.1
2.0
1.9
1.6
1.6
1.5
2.3
2.1
2.1
2.1
2.0
2.0
1.6
1.7
1.6
2.3
2.2
2.2
2.2
2.0
2.0
1.7
1.7
1.6
2.2
2.1
2.1
2.1
2.0
2.0
1.6
1.7
1.6
2.3
2.2
2.2
2.2
2.0
2.0
1.7
1.7
1.6
2.5
2.4
2.4
2.4
2.3
2.3
2.0
2.0
1.9
2.3
2.2
2.2
2.2
2.1
2.0
1.7
1.7
1.7
2.3
2.2
2.2
2.2
2.1
2.1
1.8
1.8
1.7
5.9
1.6
3.8
4.3
4.5
2.3
1.2
0.9
0.9
1.6
(0.1)
(1.0)
(0.9)
(0.3)
(0.6)
(1.2)
(1.1)
(0.9)
(0.4)
(0.5)
(0.9)
(0.6)
(0.9)
(1.0)
(0.5)
(0.5)
(0.3)
(0.4)
(0.2)
(0.3)
(0.3)
(0.5)
(0.7)
(1.0)
(0.8)
(0.5)
(0.4)
(0.7)
(0.8)
(0.8)
(0.5)
(0.7)
(0.9)
(1.2)
(1.4)
(1.5)
(0.9)
(0.9)
(0.7)
(0.2)
0.2
0.0
0.1
0.3
0.3
0.6
0.7
0.9
0.7
1.1
1.0
1.2
1.3
1.1
1.3
1.4
1.5
1.5
1.6
1.6
1.6
1.6
1.9
1.6
1.7
(2.6)
2.8
3.8
4.2
1.6
0.4
0.2
0.2
1.1
(0.7)
(1.6)
(1.5)
(0.7)
(1.1)
(1.6)
(1.5)
(1.3)
(0.8)
(0.8)
(1.2)
(0.9)
(1.2)
(1.3)
(0.8)
(0.8)
(0.5)
(0.6)
(0.5)
(0.5)
(0.5)
(0.7)
(0.9)
(1.2)
(1.0)
(0.6)
(0.6)
(0.8)
(1.0)
(1.0)
(0.7)
(0.8)
(1.0)
(1.3)
(1.6)
(1.7)
(1.1)
(1.1)
(0.8)
(0.4)
0.1
(0.1)
0.0
0.2
0.2
0.5
0.6
0.8
0.6
1.0
0.9
1.1
1.3
1.1
1.3
1.3
1.5
1.5
1.5
1.6
1.5
1.6
1.9
1.6
1.7
8.5
7.2
6.5
2.6
1.0
0.7
0.7
1.6
(0.5)
(1.5)
(1.4)
(0.6)
(0.9)
(1.6)
(1.4)
(1.2)
(0.7)
(0.7)
(1.1)
(0.8)
(1.1)
(1.2)
(0.7)
(0.7)
(0.4)
(0.5)
(0.4)
(0.4)
(0.4)
(0.7)
(0.8)
(1.2)
(1.0)
(0.6)
(0.5)
(0.8)
(1.0)
(1.0)
(0.7)
(0.8)
(1.0)
(1.3)
(1.6)
(1.7)
(1.0)
(1.0)
(0.8)
(0.3)
0.1
(0.0)
0.1
0.3
0.3
0.5
0.6
0.8
0.7
1.0
1.0
1.2
1.3
1.1
1.3
1.4
1.5
1.5
1.6
1.6
1.6
1.6
1.9
1.7
1.7
5.9
5.6
0.8
(0.8)
(0.8)
(0.6)
0.6
(1.5)
(2.6)
(2.3)
(1.3)
(1.7)
(2.3)
(2.1)
(1.8)
(1.2)
(1.2)
(1.6)
(1.3)
(1.6)
(1.7)
(1.1)
(1.1)
(0.8)
(0.8)
(0.7)
(0.7)
(0.7)
(1.0)
(1.1)
(1.5)
(1.2)
(0.9)
(0.8)
(1.0)
(1.2)
(1.2)
(0.9)
(1.0)
(1.2)
(1.5)
(1.8)
(1.9)
(1.2)
(1.3)
(1.0)
(0.5)
(0.1)
(0.2)
(0.1)
0.1
0.1
0.4
0.5
0.7
0.5
0.9
0.8
1.0
1.2
1.0
1.2
1.3
1.4
1.4
1.5
1.5
1.5
1.5
1.8
1.6
1.6
portfolio starts; those down the side are the dates to which the
annual rate of return is calculated. Thus the figure at the bottom
right hand corner - 8.0 - shows that the real return on a portfolio
bought at the end of December 2009 and held for one year to
December 2010 was 8.0%. Figures in brackets indicate negative
returns.
5.2
(1.7)
(2.9)
(2.4)
(1.8)
(0.2)
(2.6)
(3.6)
(3.2)
(2.0)
(2.4)
(2.9)
(2.7)
(2.3)
(1.7)
(1.6)
(2.0)
(1.7)
(1.9)
(2.0)
(1.4)
(1.4)
(1.1)
(1.1)
(1.0)
(1.0)
(0.9)
(1.2)
(1.4)
(1.7)
(1.5)
(1.1)
(1.0)
(1.2)
(1.4)
(1.4)
(1.1)
(1.2)
(1.4)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.1)
(0.6)
(0.2)
(0.3)
(0.2)
0.0
0.0
0.3
0.4
0.6
0.4
0.8
0.8
1.0
1.1
0.9
1.2
1.2
1.4
1.4
1.4
1.5
1.4
1.5
1.8
1.5
1.6
(8.2)
(6.8)
(4.8)
(3.5)
(1.3)
(3.8)
(4.8)
(4.2)
(2.8)
(3.1)
(3.7)
(3.3)
(2.9)
(2.1)
(2.1)
(2.5)
(2.1)
(2.3)
(2.4)
(1.8)
(1.7)
(1.3)
(1.4)
(1.2)
(1.2)
(1.2)
(1.4)
(1.6)
(2.0)
(1.7)
(1.3)
(1.2)
(1.4)
(1.6)
(1.6)
(1.2)
(1.3)
(1.6)
(1.9)
(2.2)
(2.3)
(1.6)
(1.6)
(1.3)
(0.8)
(0.3)
(0.4)
(0.3)
(0.1)
(0.1)
0.2
0.3
0.5
0.3
0.8
0.7
0.9
1.1
0.9
1.1
1.1
1.3
1.3
1.4
1.4
1.4
1.4
1.7
1.4
1.5
(5.3)
(3.1)
(1.9)
0.5
(2.9)
(4.2)
(3.6)
(2.1)
(2.5)
(3.2)
(2.9)
(2.4)
(1.7)
(1.6)
(2.1)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.0)
(1.1)
(0.9)
(0.9)
(0.9)
(1.2)
(1.3)
(1.7)
(1.4)
(1.0)
(0.9)
(1.2)
(1.4)
(1.4)
(1.0)
(1.1)
(1.4)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.1)
(0.6)
(0.1)
(0.2)
(0.2)
0.1
0.1
0.4
0.5
0.7
0.5
0.9
0.9
1.1
1.2
1.0
1.3
1.3
1.5
1.5
1.5
1.6
1.5
1.6
1.9
1.6
1.7
(0.8)
(0.2)
2.5
(2.3)
(4.0)
(3.3)
(1.6)
(2.1)
(3.0)
(2.6)
(2.1)
(1.3)
(1.3)
(1.9)
(1.4)
(1.8)
(1.9)
(1.2)
(1.1)
(0.8)
(0.9)
(0.7)
(0.7)
(0.7)
(1.0)
(1.2)
(1.6)
(1.3)
(0.9)
(0.8)
(1.1)
(1.3)
(1.3)
(0.9)
(1.0)
(1.3)
(1.6)
(1.9)
(2.0)
(1.3)
(1.3)
(1.0)
(0.5)
0.0
(0.1)
(0.0)
0.2
0.2
0.5
0.6
0.8
0.6
1.1
1.0
1.2
1.3
1.1
1.4
1.4
1.6
1.6
1.6
1.7
1.6
1.7
2.0
1.7
1.8
0.5
4.2
(2.8)
(4.7)
(3.7)
(1.8)
(2.3)
(3.2)
(2.8)
(2.3)
(1.4)
(1.3)
(1.9)
(1.5)
(1.8)
(1.9)
(1.2)
(1.2)
(0.8)
(0.9)
(0.7)
(0.7)
(0.7)
(1.0)
(1.2)
(1.6)
(1.3)
(0.9)
(0.8)
(1.1)
(1.3)
(1.3)
(0.9)
(1.0)
(1.3)
(1.6)
(1.9)
(2.1)
(1.3)
(1.3)
(1.0)
(0.5)
0.0
(0.1)
(0.0)
0.2
0.2
0.5
0.6
0.9
0.7
1.1
1.0
1.2
1.4
1.2
1.4
1.4
1.6
1.6
1.7
1.7
1.7
1.7
2.0
1.7
1.8
8.1
(4.4)
(6.4)
(4.8)
(2.2)
(2.8)
(3.7)
(3.2)
(2.6)
(1.6)
(1.5)
(2.1)
(1.6)
(2.0)
(2.1)
(1.3)
(1.3)
(0.9)
(0.9)
(0.7)
(0.8)
(0.7)
(1.1)
(1.3)
(1.7)
(1.4)
(0.9)
(0.8)
(1.1)
(1.4)
(1.3)
(0.9)
(1.1)
(1.3)
(1.7)
(2.0)
(2.1)
(1.3)
(1.4)
(1.1)
(0.5)
0.0
(0.1)
(0.0)
0.2
0.2
0.5
0.6
0.9
0.7
1.1
1.0
1.2
1.4
1.2
1.4
1.4
1.7
1.6
1.7
1.7
1.7
1.7
2.1
1.8
1.9
(15.4)
(12.9)
(8.7)
(4.7)
(4.8)
(5.6)
(4.7)
(3.8)
(2.6)
(2.4)
(3.0)
(2.4)
(2.7)
(2.8)
(1.9)
(1.8)
(1.4)
(1.4)
(1.2)
(1.2)
(1.1)
(1.5)
(1.7)
(2.1)
(1.8)
(1.2)
(1.1)
(1.5)
(1.7)
(1.6)
(1.2)
(1.3)
(1.6)
(2.0)
(2.3)
(2.4)
(1.6)
(1.6)
(1.3)
(0.7)
(0.2)
(0.3)
(0.2)
0.1
0.1
0.4
0.5
0.7
0.5
1.0
0.9
1.1
1.3
1.1
1.3
1.3
1.5
1.5
1.6
1.6
1.6
1.6
2.0
1.7
1.8
(10.4)
(5.2)
(0.8)
(2.0)
(3.5)
(2.8)
(2.0)
(0.9)
(0.9)
(1.7)
(1.1)
(1.6)
(1.8)
(0.9)
(0.8)
(0.4)
(0.5)
(0.3)
(0.4)
(0.4)
(0.8)
(1.0)
(1.5)
(1.1)
(0.6)
(0.5)
(0.9)
(1.1)
(1.1)
(0.7)
(0.9)
(1.2)
(1.5)
(1.9)
(2.0)
(1.2)
(1.2)
(0.9)
(0.3)
0.2
0.1
0.2
0.5
0.5
0.7
0.8
1.1
0.9
1.3
1.2
1.5
1.6
1.4
1.6
1.7
1.9
1.9
1.9
1.9
1.9
1.9
2.3
2.0
2.1
0.4
4.4
1.0
(1.7)
(1.2)
(0.6)
0.6
0.4
(0.7)
(0.1)
(0.7)
(1.0)
(0.1)
(0.1)
0.3
0.1
0.3
0.2
0.2
(0.3)
(0.5)
(1.0)
(0.7)
(0.2)
(0.1)
(0.5)
(0.8)
(0.8)
(0.4)
(0.5)
(0.8)
(1.2)
(1.6)
(1.7)
(0.9)
(0.9)
(0.6)
(0.0)
0.5
0.4
0.5
0.7
0.7
1.0
1.1
1.4
1.1
1.6
1.5
1.7
1.9
1.6
1.9
1.9
2.1
2.1
2.1
2.2
2.1
2.2
2.5
2.2
2.3
Each figure on the bottom line of the table shows the average
annual return up to the end of December 2010 from the year
shown below the figure. The first figure is 2.4, showing that the
average annual rate of return over the whole period since 1925
has been 2.4%.
8.6
1.3
(2.3)
(1.6)
(0.8)
0.6
0.4
(0.8)
(0.2)
(0.8)
(1.1)
(0.1)
(0.1)
0.3
0.1
0.3
0.2
0.2
(0.3)
(0.5)
(1.1)
(0.8)
(0.2)
(0.1)
(0.6)
(0.8)
(0.8)
(0.4)
(0.5)
(0.9)
(1.3)
(1.7)
(1.8)
(0.9)
(1.0)
(0.6)
(0.0)
0.5
0.4
0.5
0.7
0.7
1.0
1.1
1.4
1.1
1.6
1.5
1.7
1.9
1.7
1.9
1.9
2.1
2.1
2.2
2.2
2.1
2.2
2.5
2.2
2.3
(5.5)
(7.4)
(4.9)
(3.0)
(0.9)
(0.9)
(2.1)
(1.2)
(1.8)
(2.0)
(0.9)
(0.8)
(0.3)
(0.5)
(0.2)
(0.3)
(0.3)
(0.8)
(1.0)
(1.6)
(1.2)
(0.6)
(0.5)
(0.9)
(1.2)
(1.2)
(0.7)
(0.9)
(1.2)
(1.6)
(2.0)
(2.1)
(1.2)
(1.2)
(0.9)
(0.2)
0.3
0.2
0.3
0.6
0.6
0.9
1.0
1.2
1.0
1.5
1.4
1.6
1.8
1.5
1.8
1.8
2.0
2.0
2.1
2.1
2.0
2.1
2.4
2.1
2.2
(9.2)
(4.5)
(2.1)
0.3
0.0
(1.5)
(0.6)
(1.4)
(1.7)
(0.4)
(0.4)
0.1
(0.1)
0.2
0.0
0.0
(0.5)
(0.8)
(1.3)
(1.0)
(0.4)
(0.3)
(0.7)
(1.0)
(1.0)
(0.5)
(0.7)
(1.0)
(1.5)
(1.9)
(2.0)
(1.1)
(1.1)
(0.8)
(0.1)
0.5
0.3
0.4
0.7
0.7
1.0
1.1
1.4
1.1
1.6
1.5
1.8
1.9
1.7
1.9
2.0
2.2
2.1
2.2
2.2
2.2
2.2
2.6
2.2
2.3
0.4
1.6
3.7
2.5
0.1
0.9
(0.2)
(0.7)
0.6
0.5
1.0
0.8
0.9
0.7
0.7
0.1
(0.2)
(0.9)
(0.5)
0.1
0.2
(0.3)
(0.6)
(0.6)
(0.1)
(0.3)
(0.7)
(1.2)
(1.6)
(1.7)
(0.8)
(0.8)
(0.5)
0.2
0.8
0.6
0.7
1.0
1.0
1.3
1.4
1.6
1.4
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.4
2.5
2.4
2.4
2.8
2.4
2.5
2.8
5.3
3.2
0.1
1.0
(0.3)
(0.8)
0.6
0.5
1.1
0.8
1.0
0.7
0.7
0.1
(0.3)
(1.0)
(0.6)
0.1
0.2
(0.3)
(0.7)
(0.7)
(0.2)
(0.4)
(0.8)
(1.2)
(1.7)
(1.8)
(0.8)
(0.9)
(0.5)
0.2
0.8
0.6
0.7
1.0
1.0
1.3
1.4
1.7
1.4
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.5
2.4
2.5
2.5
2.4
2.5
2.8
2.5
2.6
7.9
3.4
(0.8)
0.6
(0.9)
(1.4)
0.3
0.2
0.9
0.6
0.8
0.6
0.6
(0.1)
(0.5)
(1.2)
(0.8)
(0.1)
0.0
(0.5)
(0.8)
(0.8)
(0.3)
(0.5)
(0.9)
(1.4)
(1.8)
(2.0)
(1.0)
(1.0)
(0.6)
0.1
0.7
0.5
0.6
1.0
0.9
1.3
1.4
1.6
1.4
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.5
2.5
2.4
2.5
2.8
2.5
2.6
(1.0)
(4.9)
(1.7)
(3.0)
(3.2)
(0.9)
(0.8)
0.1
(0.2)
0.1
(0.1)
(0.0)
(0.7)
(1.0)
(1.8)
(1.3)
(0.5)
(0.4)
(0.9)
(1.2)
(1.2)
(0.7)
(0.8)
(1.3)
(1.7)
(2.2)
(2.3)
(1.3)
(1.3)
(0.9)
(0.1)
0.5
0.3
0.4
0.8
0.8
1.1
1.2
1.5
1.2
1.8
1.6
1.9
2.1
1.8
2.1
2.1
2.3
2.3
2.4
2.4
2.3
2.4
2.7
2.4
2.5
(8.7)
(2.1)
(3.6)
(3.7)
(0.9)
(0.8)
0.2
(0.1)
0.2
0.0
0.1
(0.7)
(1.1)
(1.8)
(1.3)
(0.5)
(0.4)
(0.9)
(1.3)
(1.2)
(0.6)
(0.8)
(1.3)
(1.8)
(2.2)
(2.4)
(1.3)
(1.3)
(0.9)
(0.1)
0.6
0.4
0.5
0.8
0.8
1.2
1.3
1.6
1.3
1.8
1.7
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.4
2.5
2.4
2.4
2.8
2.4
2.5
5.0
(1.0)
(2.0)
1.2
0.9
1.8
1.2
1.4
1.0
1.0
0.1
(0.4)
(1.3)
(0.8)
0.1
0.2
(0.4)
(0.8)
(0.8)
(0.2)
(0.4)
(0.9)
(1.4)
(2.0)
(2.1)
(1.0)
(1.0)
(0.6)
0.2
0.9
0.7
0.8
1.1
1.1
1.5
1.5
1.8
1.6
2.1
2.0
2.2
2.4
2.1
2.4
2.4
2.7
2.6
2.7
2.7
2.6
2.7
3.0
2.7
2.8
(6.7)
(5.3)
(0.0)
(0.1)
1.1
0.6
0.9
0.5
0.5
(0.4)
(0.9)
(1.8)
(1.2)
(0.3)
(0.1)
(0.8)
(1.2)
(1.1)
(0.5)
(0.7)
(1.2)
(1.7)
(2.2)
(2.4)
(1.2)
(1.2)
(0.8)
0.0
0.8
0.5
0.6
1.0
1.0
1.4
1.5
1.8
1.5
2.0
1.9
2.2
2.4
2.1
2.4
2.4
2.6
2.6
2.6
2.6
2.6
2.6
3.0
2.6
2.7
(3.9)
3.5
2.2
3.2
2.1
2.2
1.6
1.5
0.3
(0.3)
(1.3)
(0.7)
0.3
0.3
(0.4)
(0.8)
(0.8)
(0.1)
(0.4)
(0.9)
(1.5)
(2.0)
(2.2)
(1.0)
(1.0)
(0.6)
0.3
1.0
0.8
0.9
1.3
1.2
1.6
1.7
2.0
1.7
2.3
2.1
2.4
2.6
2.3
2.6
2.6
2.8
2.8
2.8
2.9
2.8
2.8
3.2
2.8
2.9
11.5
5.4
5.7
3.6
3.5
2.6
2.3
0.9
0.2
(1.1)
(0.4)
0.6
0.7
(0.1)
(0.6)
(0.6)
0.1
(0.2)
(0.7)
(1.4)
(2.0)
(2.1)
(0.9)
(0.9)
(0.4)
0.5
1.2
0.9
1.1
1.4
1.4
1.8
1.9
2.2
1.9
2.5
2.3
2.6
2.8
2.4
2.8
2.8
3.0
2.9
3.0
3.0
2.9
3.0
3.4
2.9
3.0
The top figure in each column is the rate of return in the first
year, so that reading diagonally down the table gives the real
rate of return in each year since 1925. The table can be used to
see the rate of return over any period; thus a purchase made at
the end of 1926 would have gained 11.3% in value in one year
(allowing for reinvestment of income) but, over the first five
years (up to the end of 1931), would have risen in value by an
average annual real rate of 6 2%
(0.4)
2.9
1.1
1.6
0.9
0.8
(0.6)
(1.2)
(2.4)
(1.5)
(0.3)
(0.2)
(0.9)
(1.4)
(1.4)
(0.6)
(0.8)
(1.4)
(2.0)
(2.6)
(2.7)
(1.4)
(1.4)
(0.9)
0.0
0.8
0.6
0.7
1.1
1.1
1.5
1.6
1.9
1.6
2.2
2.1
2.3
2.6
2.2
2.5
2.5
2.8
2.8
2.8
2.8
2.7
2.8
3.2
2.8
2.9
6.2
1.9
2.3
1.2
1.1
(0.6)
(1.3)
(2.6)
(1.7)
(0.3)
(0.1)
(1.0)
(1.5)
(1.4)
(0.6)
(0.9)
(1.4)
(2.1)
(2.7)
(2.8)
(1.4)
(1.4)
(0.9)
0.1
0.9
0.6
0.7
1.2
1.1
1.5
1.7
2.0
1.7
2.3
2.1
2.4
2.6
2.3
2.6
2.6
2.9
2.8
2.9
2.9
2.8
2.9
3.3
2.8
3.0
(2.3)
0.4
(0.4)
(0.2)
(1.9)
(2.5)
(3.8)
(2.6)
(1.0)
(0.8)
(1.6)
(2.1)
(2.0)
(1.1)
(1.3)
(1.9)
(2.6)
(3.2)
(3.3)
(1.8)
(1.8)
(1.2)
(0.2)
0.7
0.4
0.5
1.0
1.0
1.4
1.5
1.9
1.5
2.2
2.0
2.3
2.5
2.2
2.5
2.5
2.8
2.7
2.8
2.8
2.7
2.8
3.2
2.8
2.9
3.1
0.5
0.5
(1.8)
(2.5)
(4.1)
(2.7)
(0.9)
(0.6)
(1.6)
(2.1)
(2.0)
(1.0)
(1.3)
(1.9)
(2.6)
(3.2)
(3.4)
(1.8)
(1.8)
(1.2)
(0.1)
0.8
0.5
0.7
1.1
1.1
1.5
1.6
2.0
1.6
2.3
2.2
2.5
2.7
2.3
2.7
2.7
2.9
2.9
2.9
2.9
2.8
2.9
3.3
2.9
3.0
(2.0)
(0.8)
(3.4)
(3.9)
(5.5)
(3.6)
(1.4)
(1.0)
(2.1)
(2.6)
(2.4)
(1.3)
(1.6)
(2.2)
(2.9)
(3.6)
(3.7)
(2.0)
(2.0)
(1.4)
(0.3)
0.7
0.4
0.5
1.0
1.0
1.5
1.6
2.0
1.6
2.3
2.1
2.4
2.7
2.3
2.6
2.6
2.9
2.9
2.9
2.9
2.8
2.9
3.3
2.9
3.0
0.5
(4.1)
(4.5)
(6.3)
(3.9)
(1.3)
(0.9)
(2.1)
(2.7)
(2.5)
(1.2)
(1.5)
(2.2)
(3.0)
(3.7)
(3.8)
(2.0)
(2.0)
(1.4)
(0.2)
0.8
0.5
0.7
1.2
1.1
1.6
1.7
2.1
1.7
2.4
2.3
2.6
2.8
2.4
2.8
2.8
3.1
3.0
3.0
3.1
3.0
3.0
3.5
3.0
3.1
(8.4)
(6.9)
(8.5)
(5.0)
(1.7)
(1.1)
(2.4)
(3.0)
(2.8)
(1.4)
(1.7)
(2.5)
(3.3)
(4.0)
(4.1)
(2.2)
(2.1)
(1.5)
(0.2)
0.9
0.5
0.7
1.2
1.1
1.6
1.8
2.2
1.8
2.5
2.3
2.6
2.9
2.5
2.9
2.8
3.1
3.1
3.1
3.1
3.0
3.1
3.5
3.1
3.2
(5.4)
(8.5)
(3.8)
0.1
0.4
(1.4)
(2.3)
(2.1)
(0.6)
(1.0)
(1.9)
(2.8)
(3.7)
(3.8)
(1.8)
(1.7)
(1.0)
0.3
1.4
1.0
1.1
1.6
1.6
2.1
2.2
2.6
2.2
2.9
2.7
3.0
3.3
2.8
3.2
3.2
3.5
3.4
3.4
3.5
3.3
3.4
3.9
3.3
3.5
(11.5)
(2.9)
2.0
1.9
(0.6)
(1.7)
(1.6)
0.0
(0.5)
(1.6)
(2.6)
(3.5)
(3.7)
(1.5)
(1.5)
(0.7)
0.6
1.8
1.3
1.5
2.0
1.9
2.4
2.5
2.9
2.5
3.2
3.0
3.3
3.6
3.1
3.5
3.5
3.8
3.7
3.7
3.7
3.6
3.6
4.1
3.6
3.7
6.4
9.5
6.8
2.4
0.4
0.2
1.8
0.9
(0.4)
(1.6)
(2.7)
(3.0)
(0.7)
(0.7)
0.0
1.4
2.6
2.1
2.2
2.7
2.6
3.1
3.2
3.6
3.1
3.9
3.6
3.9
4.1
3.6
4.0
4.0
4.3
4.2
4.2
4.2
4.0
4.1
4.5
4.0
4.1
12.6
7.0
1.1
(1.1)
(1.0)
1.1
0.2
(1.2)
(2.5)
(3.6)
(3.8)
(1.3)
(1.3)
(0.4)
1.1
2.4
1.8
2.0
2.5
2.4
3.0
3.0
3.5
2.9
3.8
3.5
3.8
4.1
3.5
3.9
3.9
4.2
4.1
4.1
4.1
4.0
4.0
4.5
3.9
4.0
1.6
(4.2)
(5.3)
(4.1)
(1.1)
(1.8)
(3.0)
(4.2)
(5.3)
(5.3)
(2.4)
(2.3)
(1.4)
0.3
1.7
1.2
1.4
2.0
1.9
2.5
2.6
3.1
2.5
3.4
3.1
3.5
3.8
3.2
3.7
3.6
3.9
3.8
3.9
3.9
3.7
3.8
4.3
3.7
3.8
(9.8)
(8.5)
(6.0)
(1.8)
(2.4)
(3.8)
(5.1)
(6.1)
(6.1)
(2.8)
(2.7)
(1.6)
0.2
1.7
1.2
1.4
2.0
1.9
2.5
2.7
3.1
2.6
3.5
3.2
3.6
3.8
3.3
3.7
3.7
4.0
3.9
3.9
3.9
3.8
3.8
4.4
3.8
3.9
(7.3)
(4.0)
1.1
(0.5)
(2.5)
(4.2)
(5.6)
(5.6)
(2.0)
(2.0)
(0.8)
1.1
2.7
2.0
2.1
2.8
2.7
3.3
3.4
3.8
3.2
4.1
3.8
4.2
4.4
3.8
4.3
4.2
4.5
4.4
4.4
4.4
4.2
4.3
4.8
4.2
4.3
(0.7)
5.5
1.9
(1.3)
(3.6)
(5.3)
(5.3)
(1.3)
(1.3)
(0.2)
1.9
3.5
2.8
2.9
3.5
3.3
3.9
4.0
4.4
3.8
4.7
4.3
4.7
5.0
4.3
4.7
4.7
5.0
4.8
4.8
4.8
4.6
4.6
5.2
4.5
4.6
12.0
3.1
(1.5)
(4.4)
(6.2)
(6.1)
(1.4)
(1.4)
(0.1)
2.2
3.9
3.0
3.1
3.8
3.6
4.2
4.3
4.7
4.0
5.0
4.6
5.0
5.2
4.5
5.0
4.9
5.2
5.0
5.0
5.0
4.8
4.8
5.3
4.7
4.8
(5.1)
(7.7)
(9.3)
(10.2)
(9.4)
(3.5)
(3.2)
(1.5)
1.1
3.2
2.3
2.4
3.2
3.0
3.7
3.8
4.3
3.6
4.6
4.2
4.6
4.9
4.2
4.7
4.6
4.9
4.8
4.8
4.7
4.5
4.6
5.1
4.4
4.5
(10.3)
(11.3)
(11.9)
(10.4)
(3.2)
(2.9)
(1.0)
1.9
4.1
3.0
3.1
3.9
3.6
4.4
4.4
4.9
4.1
5.2
4.7
5.1
5.4
4.6
5.1
5.0
5.4
5.2
5.2
5.1
4.9
4.9
5.5
4.8
4.9
(12.3)
(12.7) (13.0)
(10.4) (9.5) (5.7)
(1.3)
2.6 11.5
(1.4)
1.6
7.0
0.6
3.4
8.0
3.8
6.8 11.3
6.1
9.0 13.2
4.6
7.0 10.2
4.6
6.6
9.4
5.3
7.3
9.8
4.9
6.6
8.8
5.6
7.2
9.3
5.6
7.1
8.9
6.0
7.5
9.3
5.1
6.3
7.9
6.2
7.5
9.0
5.6
6.8
8.2
6.0
7.1
8.5
6.3
7.3
8.6
5.4
6.4
7.5
5.9
6.8
7.9
5.7
6.6
7.7
6.1
6.9
8.0
5.8
6.7
7.6
5.8
6.6
7.5
5.7
6.5
7.4
5.5
6.2
7.0
5.5
6.2
7.0
6.1
6.8
7.5
5.3
5.9
6.7
5.4
6.0
6.7
31.8
14.0 (1.5)
13.0
4.6
16.0 11.1
17.4 14.0
13.1
9.7
11.8
8.7
11.9
9.4
10.6
8.2
10.9
8.8
10.4
8.4
10.6
8.9
9.0
7.3
10.1
8.6
9.2
7.7
9.4
8.1
9.5
8.2
8.3
7.1
8.7
7.6
8.4
7.3
8.7
7.6
8.3
7.3
8.1
7.2
8.0
7.0
7.6
6.7
7.5
6.6
8.1
7.2
7.1
6.3
7.2
6.4
11.1
18.0
19.7
12.6
10.9
11.3
9.6
10.2
9.6
10.0
8.1
9.5
8.5
8.8
8.9
7.6
8.1
7.8
8.1
7.7
7.6
7.4
7.0
7.0
7.6
6.6
6.7
25.3
24.2
13.1
10.8
11.3
9.4
10.1
9.4
9.8
7.8
9.3
8.3
8.6
8.8
7.4
7.9
7.6
7.9
7.6
7.4
7.2
6.8
6.8
7.5
6.4
6.5
23.2
7.5 (6.2)
6.4 (1.1)
8.0
3.4
6.4
2.6
7.7
4.9
7.3
4.9
8.0
6.0
6.1
4.1
7.9
6.3
6.8
5.3
7.3
6.0
7.6
6.4
6.2
5.0
6.9
5.8
6.6
5.6
7.0
6.1
6.6
5.7
6.5
5.7
6.4
5.6
6.0
5.2
6.0
5.2
6.8
6.1
5.7
5.0
5.8
5.1
4.1
8.6
5.7
7.8
7.2
8.2
5.6
8.0
6.7
7.3
7.6
6.0
6.8
6.5
6.9
6.5
6.4
6.3
5.9
5.9
6.7
5.6
5.7
13.2
6.5
9.1
8.0
9.0
5.9
8.5
7.0
7.6
8.0
6.2
7.0
6.6
7.1
6.7
6.6
6.4
6.0
5.9
6.8
5.6
5.7
0.3
7.1
6.4
8.0
4.5
7.8
6.1
7.0
7.4
5.5
6.4
6.1
6.7
6.2
6.1
6.0
5.6
5.6
6.5
5.3
5.4
14.4
9.5
10.7
5.6
9.3
7.1
8.0
8.3
6.1
7.1
6.7
7.2
6.7
6.6
6.4
5.9
5.9
6.8
5.5
5.6
4.9
9.0
2.8
8.1
5.8
6.9
7.5
5.1
6.3
5.9
6.6
6.1
6.0
5.9
5.4
5.4
6.4
5.1
5.2
13.2
1.7
9.2
6.0
7.3
7.9
5.1
6.5
6.0
6.8
6.2
6.1
5.9
5.4
5.4
6.5
5.1
5.2
(8.6)
7.2
3.7
5.9
6.9
3.8
5.5
5.2
6.1
5.5
5.5
5.3
4.8
4.9
6.1
4.6
4.8
25.7
10.4
11.2
11.2
6.5
8.1
7.3
8.1
7.2
7.0
6.7
6.0
6.0
7.2
5.5
5.7
(3.1)
4.7
6.7
2.2
4.9
4.5
5.8
5.1
5.1
5.0
4.4
4.5
5.9
4.2
4.5
13.0
12.0
4.0
6.9
6.1
7.3
6.4
6.2
5.9
5.2
5.2
6.7
4.8
5.0
10.9
(0.2) (10.2)
5.0
2.2
4.4
2.3
6.2
5.1
5.3
4.2
5.2
4.3
5.1
4.3
4.4
3.6
4.4
3.7
6.1
5.7
4.1
3.5
4.4
3.9
16.2
9.2
10.7
8.1
7.5
6.9
5.7
5.6
7.6
5.0
5.3
2.6
8.1
5.6
5.4
5.1
4.0
4.2
6.6
3.8
4.2
13.9
7.1
6.3
5.7
4.3
4.5
7.1
4.0
4.4
0.7
2.7
3.1
2.0
2.7
6.0
2.7
3.3
4.7
4.4
2.5
3.2
7.1
3.0
3.7
4.0
1.4
2.7
7.7
2.6
3.5
(1.2)
2.0
9.0
2.3
3.4
5.2
14.5
3.5
4.6
24.6
2.6 (15.5)
4.4 (4.5)
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
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1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
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1960
1961
1962
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8.0 2010
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1926
1927
1928
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1931
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1935
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1940
1941
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2010
Analyst Certification(s)
We, Piero Ghezzi, Christian Keller, Luca Ricci, Michael Gavin, Amrita Sen, Alanna Gregory, Jose Wynne, Sreekala Kochugovindan , Arne D. Staal, and
Michael Dicks, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject
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recommendations or views expressed in this research report.
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Cover Quotes page.qxp

INSIDE FRONT COVER

"People almost invariably arrive at their beliefs

"History has not dealt kindly with the aftermath

Inflation is the one form of taxation that can be

"Markets can remain irrational longer than you

"If history repeats itself, and the unexpected

"The greater our knowledge increases the greater

Published by Barclays Capital

Barclays Capital | Equity Gilt Study

EQUITY GILT STUDY 2011

Barclays Capital | Equity Gilt Study

Barclays Capital | Equity Gilt Study

Barclays Capital | Equity Gilt Study

Easy policies today, rude awakening tomorrow

The global easing and its aftermath

Extremely easy conditions clearly succeeded in averting a depression-like period and

resulting in massive policy

US extreme policy easing

Figure 1: Global recovery was V-shaped

BRIC GDP (% y/y)

Global GDP (% y/y)

Figure 2: because the policy response was massive

Diff b/w the Fed funds rate and BarCap

Source: Datastream, Barclays Capital

Barclays Capital | Equity Gilt Study

Europe has its own set of issues:

The UK stands out in its fiscal

while Japan has a

EM economies are maintaining

Past experience and

but leaving policies loose for

Two bubble candidates:

Barclays Capital | Equity Gilt Study

Some tightening today could

Policy toolkits in EM and

Risks of undue delays in policy

Second, the serious deterioration in medium-term fundamentals, in particular the

Barclays Capital | Equity Gilt Study

Fiscal challenges in advanced economies

Necessary fiscal adjustments are massive

The US and Japan stand out in

Figure 3: Gross public debt has been trailing higher

Gross public debt % of GDP

Figure 4: as has net debt

Net public debt % of GDP

Barclays Capital | Equity Gilt Study

Figure 5: Required fiscal adjustment in selected advanced economies

Source: EU, Haver, OECD, Barclays Capital

Figure 6: Our assumptions on interest-growth differential compared to historical estimates

The interest rate-growth

Barclays Capital | Equity Gilt Study

Interest rates could be higher

Growth could be lower

Larger interest rate-growth

differentials imply a larger fiscal

Fiscal tightening to the rescue?

Figure 7: Additional fiscal adjustment*: higher interest rates

Figure 8: Large debt reduction assisted by high growth