Wed, 02/01/2013 - 09:28
Although the stock market’s performance since 2000 has been generally lacklustre, the pessimism currently surrounding stocks may be unwarranted, according to the latest position paper from Turner Investments.
The Pennsylvania-based firm believes stocks have historically been, and should continue to be, the best wealth generators in the long run.
Titled “Why we believe stocks should remain a rewarding asset class over time”, the paper was written by Bob Turner (pictured), chairman and chief investment officer. In the paper, Turner points out that in the period covering roughly the past 13 years, from January 2000 to November 2012 – a time he calls “the Unlucky 13 Era” – the S&P 500 Index, a widely followed benchmark of the stock market, has returned a “woeful” 1.6 per cent annualised. But he believes that era is an anomaly and that “stocks should resume their usual solidly positive performance, rising toward annualised returns that may reach the high single digits at the very least.”
The paper lists six reasons why, compared to other asset classes, Turner Investments believes stocks have the potential to continue rewarding investors:
• Stocks have an 86-year long history of outperformance over other asset classes.
• Stocks come with volatility risk, but other assets also carry risk – especially inflation risk, which stocks have historically provided a margin of safety against.
• Stocks are affordable relative to past valuations and bonds.
• Historically, after periods of underperformance, stocks revert to the mean and provide improved results.
• Stocks may stand to benefit from a favourable economic outlook.
• Demographic shifts in the US related to baby boomers and the millennial generation could power stocks higher in the years ahead.
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