Episode #91: Review of UBS Global Investment Returns Yearbook 2026

• INTRODUCTION:

François Doyon La Rochelle:

You’re listening to Capital Topics, episode #91!

This is a monthly podcast about passive asset management and financial and tax planning ideas for the long-term investor.

Your hosts for this podcast are James Parkyn and me François Doyon La Rochelle, both portfolio managers with PWL Capital.

In our podcast today we will review the key findings from 27^th edition of the UBS Global Investment Returns Yearbook for 2026.

Enjoy!

• REVIEW OF UBS GLOBAL INVESTMENT RETURNS YEARBOOK 2026:

François Doyon La Rochelle:

As usual, I will start this off.  Our topic today is a Review of the 27th edition of The UBS Global Investment Returns Yearbook, the 2026 Edition.  Reviewing the Yearbook is an annual ritual for our Podcast.  This is the 5th year we have published a podcast covering the Yearbook. I remind our listeners that prior podcasts covering the Yearbook are still very relevant today.

I would also like to highlight that UBS publishes the Yearbook in collaboration with Professors Paul Marsh and Mike Staunton of London Business School and Professor Elroy Dimson of Cambridge University.  They have been involved in all 27 editions.

That said, James, could you give our Listeners an Intro to the Yearbook and explain its purpose?

James Parkyn:

Ok Francois.  “The UBS Global Investment Returns Yearbook is widely recognized as a leading authority on long‑run investment returns, drawing on 126 years of data across equities, bonds, cash, currencies, and now gold in 35 markets. This year’s edition again demonstrates the value of historical perspective in assessing current dynamics, with new analysis ranging from whether new technologies have led to bubbles to the long‑term return characteristics of gold.”

The purpose of the Yearbook has not changed: It is not to make forecasts, but instead to inform investors about long-run performances, to interpret it, analyze it, learn from it, and help illuminate current concerns.

François Doyon La Rochelle:

For me, it is a must-read to provide a framework for interpreting current market issues through the lens of capital markets history. The Yearbook content always comes back to the anchor of risk and reward, and the importance of diversification and asset allocation.  This, as our Regular Listeners know, is core to our Investment Philosophy.

OK, so now James, I’m going to start off today’s review by asking you the same question as in prior years.  Why do you find the Yearbook useful as a Portfolio Manager?

James Parkyn:

Francois, my answer is the same as in prior years.  Our discipline is to invest with “an Investor Mindset, focused on the long term”.  We don’t want to be led astray by short-term noise in the financial media and by recent financial market volatility.  This challenge is daunting and applies to all investors, including us Professionals.  We have often said on our Podcast: “It is simple to say but not easy to do: We must always be cognizant that we can fall into a trap of trying to “Forecast the Future”.  This is why the Yearbook is so useful to us as portfolio managers.

François Doyon La Rochelle:

I agree with you, James.  The Yearbook helps put current financial market events into context by comparing them to long term capital market history.  This year’s edition focuses on many topics including Inflation, currencies, investment risk, diversification, projected returns, and factor premiums.  So, it really is covering a lot of ground.

James Parkyn:

Absolutely, François. For our listeners, the Yearbook’s overall message is that “much longer periods are needed to understand risk and return from stocks and bonds because markets are so volatile. Over the last 126 years, equities have outperformed bonds, bills and inflation in every country. They have dominated bonds, which are somewhat less risky, while bonds have outperformed Treasury bills. Over the long run, the law of risk and return has therefore held, with the riskiest assets providing the highest return and risk-free bills giving the lowest return.”

François Doyon La Rochelle:

Well, James, our discipline of being globally invested has paid off in 2025 and again in 2026 Year-to-date. If we look at the JULY 31ST, 2026, PWL Markets Statistics page, we can find the Year-to-date results in Global Equity Markets in Canadian Dollars:

1. The U.S Total Market is up 12.9% year to date.
2. The CAD Index S&P TSX Composite is up 12.5%.
3. International Developed Equities are up 14.2%.
4. Emerging Market Equities are up 23.1%.

James Parkyn:

As our regular listeners know, U.S. stock market returns have dominated since the Global Financial Crisis in 2008-2009.  Since 2025, other Global Equity Markets have really performed well.  Canadian investors who were globally diversified, especially with US equities, benefited tremendously over the past 20 years. We’ve discussed this in our last podcast where we reviewed our model portfolio performances. That said, the Yearbook teaches us that we must accept that sometimes diversification does not pay off.

François Doyon La Rochelle:

James, many people feel the long term is ten to twenty years.  The Yearbook data helps us appreciate that investors should consider a much longer time horizon when informing their investment decisions.

James Parkyn:

Effectively, Francois, a long-term perspective is needed because stocks can be very volatile. No surprise there. It takes a lot of historical data points to obtain a realistic understanding of what long-run returns can tell us about the future. The Yearbook confirms that the annualized returns from 1900 were 9.8% for Global Equities versus 4.6% on Bonds, 3.4% on T-Bills, and inflation has been 2.9% per year. This confirms that stocks have performed as expected because they are riskier.

François Doyon La Rochelle:

James, the Yearbook confirms that the real annualized returns, net of inflation, in US markets from 1900 were 6.9% for US Equities versus 1.7% on Bonds, 0.5% on T-Bills.  This really tells the story of why Canadian investors should be invested in a globally diversified portfolio of stocks.  The Yearbook highlights that $1 invested in 1900 with dividends reinvested would have grown in purchasing power by 3,296 times.  Bonds 7.4 times and Bills 1.8 times.

James Parkyn:

The difference in returns is really staggering, Francois. The Yearbook highlights that the real stock returns were positive in all 21 countries that have data going back as far as 1900.  The real equity returns ranged from 3% to 6.9%.  The 6.9% annualized real return on US equities contrasts with the 4.5% real return in U.S dollars on the World-ex US index.

François Doyon La Rochelle:

The Yearbook highlights this difference of 2.4%. When compounded over 126 years, it leads to a large difference in terminal wealth.  As I mentioned before, the Yearbook illustrates that a dollar invested in equities in 1900 resulted in a terminal value of 3,296 times in terms of real purchasing power. The same investment in stocks from the rest of the world gave a terminal value of 249 times, less than eight percent of the US value.

James Parkyn:

This is a significant difference, Francois. But it’s the magic of compound interest, and it doesn’t inform us about future returns. The Yearbook highlights that a common factor among the best-performing equity markets is that they tended to be resource-rich and/or New World countries. The worst-performing markets were those afflicted by wars and lost.

François Doyon La Rochelle:

James, what does the Yearbook say about stock volatility?

James Parkyn:

Francois, the Yearbook data shows the US stock market’s standard deviation of 19.8% places it among the lower-risk markets, ranking sixth after Canada (16.7%), Australia (17.2%), New Zealand (19.0%), Switzerland (19.1%), and the UK (19.3%). The average standard deviation for the 21 countries in the study with reliable data going back to 1900 is 23.4%. The Yearbook presents a World Index, and it resulted in a 17.3% standard deviation. This really shows the power of global diversification in reducing risk.

Well, Francois, every investor knows that equities are volatile. That’s why we expect to get a higher return than investing in safer assets. The Yearbook highlights that investing in equities has proved rewarding over the long run. In an average year, the real return on US equities was 6.9%. The range of outcomes can be very wide. During the 126 years under study, there were 6 years with annual returns below 40%. On the other hand, there were 6 years of returns over 40%.

François Doyon La Rochelle:

James, what does the Yearbook say about Emerging Markets volatility?

James Parkyn:

No real surprise, Francois: Although individual Emerging Markets have been more volatile than Developed Markets, the average Emerging Markets volatility has declined sharply over the last 25 years. By the end of 2025, the gap in volatility between the average Emerging Markets and Developed Markets fell below 5%.

François Doyon La Rochelle:

James, what does the Yearbook say about bonds?

James Parkyn:

It’s quite surprising actually.  The Yearbook states that since 1900, the average standard deviation of real bond returns across countries was 13.1% versus 23.0% for equities and 7.5% for treasury bills. While bonds have generally been much less volatile than equities, they have experienced some protracted periods of very low or high returns.

François Doyon La Rochelle:

This is quite surprising!  The average standard deviation of real bond returns across countries was 13.1%.  Current Bond market volatility is much lower at 6.14% for the Canadian Total Bond Market and for the Global Total Bond Market at 4.88% hedged to Canadian Dollars. I would add that these are 5-year standard deviation numbers.

James Parkyn:

Francois, absolutely.  Recent Bond market returns and volatility reflect the Golden Age of the last 40 years ending in 2022.  I will quote from the Yearbook: “Over time, real interest rates fell from their highs in the early and mid-1980s, giving a further boost to bond prices. Then, during the two bear markets of the early 21st century, the Eurozone crisis and the COVID-19 pandemic, bonds benefited from their safe-haven status, from policy interest rates being kept low to support economies, and from quantitative easing. They also benefited from the negative stock-bond correlation.”

François Doyon La Rochelle:

James, it is fair to say that Investors have grown used to these high bond returns, but projecting them into the future was clearly inappropriate?

James Parkyn:

Francois, this is another example of the importance of looking at long periods of history to understand markets. Even a period of four decades can be misleading if naively extrapolated.

I would add to this: the Yearbook highlights about bonds that “real bond returns from 2022 to 2025 have been very negative.” For investors who had grown used to high bond returns and who saw bonds as a safe asset, the returns in 2022 were shocking. The Yearbook also states that “the real returns on US and UK bonds were −31% and −39%. The average return across European countries was −35%, while across all 21 countries in the DMS database was −31%.”

François Doyon La Rochelle:

James to add to this point, by looking at our Market Statistics page, you will see that inflation has taken a toll on bond returns since inflation has surpassed bond returns in Canada over the last 10 years.

Now, as we all know, James, most investors are very afraid of deep bear markets.  What does the Yearbook say about historical bear markets?

James Parkyn:

Francois, the Yearbook covers the four great bear markets since 1900, plotting their drawdown and recovery times. If we look at the last 25 years, for example, after the tech bubble burst in March 2000, US equity prices collapsed, and the full drawdown and recovery period lasted seven and a half years until July 2007. The subsequent Global Financial Crisis in 2008-2009 saw the market reach its bottom in February/early March 2009. The market took four years to recover from there.

François Doyon La Rochelle:

James, does the Yearbook have anything new to say about stocks as an inflation hedge?

James Parkyn:

Yes, François, the Yearbook demonstrates that periods of higher levels of inflation have been associated with lower performance from both stocks and bonds. Stocks are not therefore a hedge against inflation, but over the longer term they have been excellent at beating inflation because of the equity risk premium. Francois, we covered this last year in our review of the 2025 Yearbook, and I quote: “Equities have enjoyed excellent long-run returns; they are not and never have been the hedge against inflation that many observers have suggested. Rather, stocks should be seen as excellent inflation beaters due to the equity risk premium.”

François Doyon La Rochelle:

Now James, let’s look more closely at what the Yearbook has to say about Emerging Markets.

James Parkyn:

Francois, emerging Markets tend to be associated with growth, and so investors often assume higher expected returns. The Yearbook looks at the last 126 years by comparing the performance of Emerging Markets and Developed Markets indexes, both for equities and bonds.

The annualized return from investing in Emerging Markets was 6.9% compared with 8.5% from Developed Markets. However, the key is that the Emerging Markets weight in the World Index is quite small. The World Index had an annualized return of 8.4%. For a global investor, the impact from including or excluding Emerging Markets has historically been small.

François Doyon La Rochelle:

James, it is surprising to me that Emerging Markets add so little to Global returns.  However, over the last 20-25 years, the Market Cap of Emerging Markets has grown significantly. It is now close to 13% of global market capitalization.

James, does the Yearbook provide any insights on more recent global market returns?

James Parkyn:

Yes, Francois, the Yearbook looks at the 21st century returns over the 26 years since the first Yearbook was published at the start of 2000. The Yearbook highlights that real Stock returns have been somewhat lower than during the 20th century, while real bond returns have been a little higher. However, despite four bear markets since 2000, global investors have enjoyed good returns: an annualized real USD return of 4.0% on stocks, 2.6% on bonds, and a nominal equity premium relative to bills of 4.7%

François Doyon La Rochelle:

In 2025, geopolitical risk became a central concern. With the Trump Liberation Day Tariffs and, in 2026, the war in Iran and its impact on Global oil supply.  What does the Yearbook have to say about geopolitical risk?

James Parkyn:

Geopolitical risk, Francois, is a huge topic for investors today. Whether it is about armed conflict or trade conflict, geopolitics clearly matters.

However, with a very long-horizon view, this is what the Yearbook has to say: “These events are relatively rare. Much of the time, investors would be correct to “look through the noise” of geopolitics. At the same time, however, they require judgement to distinguish the signal from the noise.”

François Doyon La Rochelle:

I agree with the Yearbook, James. When you are in the middle of the geopolitical crisis, you feel the urge to react. Capital Market history tells us that economic risk has been even more important to investors than geopolitical risk.

James Parkyn:

Absolutely, Francois, and the Yearbook makes that case; I quote: “By a wide margin, world wars were less damaging to world equities than the four great peacetime bear markets. These bear markets represented the actualization of downside economic risk. Three of them were triggered by economic factors, while the fourth, the 1973-74 stock market crash, was activated by geopolitics, but played out as an economic crisis.

François Doyon La Rochelle:

James, economic risk is often thought of as business cycle or recession risk.

James Parkyn:

François, the Yearbook has some interesting insights about recessions.  Interestingly, I had a question from a client recently about why we don’t seem to have recessions anymore.  The Yearbook highlights that “recessions have become less frequent. Over the last half-century, the US has suffered just four recessions and been in recession less than 10% of the time. Business cycles are now fuzzier. Economists can find it hard to judge where we are in “the cycle”. Notably, none of the four great bear markets began with a recession.”  This last point is the key to me, François.

François Doyon La Rochelle:

James, what other types of Economic Risk does the Yearbook address?

James Parkyn:

François, the Yearbook looks at three other types of Economic Risk:

• Interest rate cycles linked to the risk of inflation and its control are another source of economic risk – for both bond and stock markets.
• Financial leverage risk, itself a key economic risk. Leverage has played a central role in market and economic disasters, often leading to banking crises. Recently, the GFC of 2008-2009 was the classic example of a leverage-fueled meltdown.
• Valuation risk in equity markets is also a major form of economic risk. It is the risk arising from investors realizing that current valuations can no longer be justified, leading to corrections or bear markets.

François Doyon La Rochelle:

James, that is a lot for investors to consider.  We addressed the topic of Expected Returns in our last Podcast.  What does the Yearbook say about Expected Returns?

James Parkyn:

Francois, the Yearbook also estimates that expected returns going forward will be lower. I quote:” After adjusting for non-repeatable factors that favored equities in the past, we infer that global investors can expect an equity premium (relative to bills)… of approximately 5%.”

Investors need to appreciate that the long term in investing is much longer than they realize.

François Doyon La Rochelle:

Yes, James, as you said earlier, investors need to understand that long term is not 10 to 20 years; it’s much longer than that.

Finally, James, what takeaways does the Yearbook have for our Listeners concerning Global diversification?

James Parkyn:

There is really nothing new here, Francois.  As we often discuss in our Podcasts, diversification is a key part of our investment discipline. What the Yearbook has to say is consistent with our thinking. I quote: “The power of diversification across stocks, markets, and asset classes helps to reduce but not eliminate risk. Over the last 50 years, except for US-based investors, investing globally led to better risk-adjusted returns than investing only in their home markets. Reaping the benefits of diversification is a long-term strategy, but it can let you down in the short term.”

François Doyon La Rochelle:

I think we will conclude here. I hope our Listeners have found our review of the UBS 2026 Global Returns Yearbook useful in helping them make smart decisions with their long-term money. Good investment decisions, based on sensible criteria, can sometimes have disappointing outcomes in the short term. This brings us back, James, to the importance of a long-term perspective accompanied by an appreciation of the laws of risk and return.  I recommend that our listeners always consider their long-term goals, their risk profile, their ability to take risks, and their time horizon when building their portfolios.

• CONCLUSION

François Doyon La Rochelle:

Thank you, James, for sharing your thoughts and expertise again today.

James Parkyn:

You are welcome, Francois.

François Doyon La Rochelle:

That’s it for episode #91 of Capital Topics!

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