What can 126 years of market history tell us about investing? An enormous amount, according to the 2026 UBS Global Investment Returns Yearbook.
Stocks have handsomely rewarded investors over the long run, but earning those returns has meant enduring substantial risk along the way. This is one of the central lessons from 126 years of data in the UBS yearbook.
Now in its 27th edition, the report is a must-read for interpreting markets through the lens of history.
It is published by the Swiss bank UBS in collaboration with London Business School professors Paul Marsh and Mike Staunton and Cambridge University’s Elroy Dimson, who have been involved for all 27 editions.
We’ve been covering the yearbook for the past five years in our blog and podcast because its long horizon puts current financial market events into a useful historic context. This aligns perfectly with our investing approach at PWL.
Many people feel the long term is 10 to 20 years. The yearbook shows that we should consider an even longer time horizon when making investment decisions.
“Much longer periods are needed to understand risk and return from stocks and bonds because markets are so volatile,” the yearbook notes.
What did the latest yearbook find? Since 1900, U.S. equities have enjoyed 9.8% annualized returns versus 4.6% for bonds, 3.4% for T-bills and inflation at 2.9%. Real annualized returns, net of inflation, were 6.9% for U.S. equities compared to 1.7% for bonds and 0.5% for T-Bills.
A dollar invested in U.S. equities in 1900, with dividends reinvested, would have grown in purchasing power by 3,296 times (after inflation). This remarkable return shows the magical power of compounding.
The same in bonds would have grown 7.4 times, while a T-bill investment would have gone up 1.8 times.
“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,” the yearbook concludes.
“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.”
Real stock returns were positive in all 21 countries that have data going back to 1900. Gains ranged from 3% to 6.9%, with a 4.5% real return for the World-ex U.S. Index in U.S. dollar terms. This translates into purchasing power growth of 249 times since 1900.
Returns were highest in industrialized and resource-rich countries, while the worst-performing markets were those afflicted by wars and resulting economic dislocation.
Volatility was the price to pay for the equity gains. During the 126 years under study, there were six years with annual U.S. equity returns below negative 40%. On the other hand, six years saw gains of over 40%.
Of 21 countries with reliable data back to 1900, Canada had the lowest-risk market for real equity returns, with a standard deviation of 16.7%. Next were Australia (17.2%), New Zealand (19.0%), Switzerland (19.1%), the U.K. (19.3%) and the U.S. (19.8%).
The average standard deviation for the 21 countries was 23.4%. The yearbook presents a World Index for equities based on each country’s market capitalization, which had a 17.3% standard deviation. This shows the power of global diversification in reducing risk.
Emerging markets have been more volatile than developed markets, but the gap has declined over the last 25 years. Volatility in the former has fallen, narrowing the gap in standard deviations with developed markets to less than 5% at the end of 2025.
Turning to bonds, volatility has been significantly lower. Real bond returns averaged a 13.1% standard deviation since 1900 versus 23.0% for equities and 7.5% for Treasury bills. (These figures exclude Austria.)
At the same time, bonds have experienced protracted periods of very low or high returns. Recent high bond market returns and volatility reflect a golden age of low interest rates that boosted bond prices and ended in 2022 with the return of inflation. Projecting these returns into the future was not appropriate, as the yearbook notes, real returns on U.S. and U.K. bonds were -31% and -39% respectively from 2022 to 2025.
Our market statistics page shows the toll on bond returns from inflation. The latter has surpassed bond returns in Canada over the last 10 years.
Geopolitical risk has been a central concern in today’s landscape of tariffs, wars and disruption to the global oil supply. The yearbook takes a sanguine view of the impacts from such risks.
“These events are relatively rare,” the report says. “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.”
Wars, in fact, have been far less damaging to world equities than the four great peacetime bear markets, the yearbook found.
“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.”
What about going forward? In our blog and Capital Topics podcast, we recently noted that the last few years’ exceptional equity gains are unlikely to persist. The yearbook came to a similar conclusion.
“Global investors can expect an equity premium (relative to bills) of around 3½%. The corresponding arithmetic mean risk premium would be around 5%,” UBS says.
“Our estimate is below the long-run historical premium and well below the premium in the second half of the 20th century. Some investment books still cite figures as high as 7% for the geometric, and 9% for the arithmetic, mean. We believe investors who rely on such numbers are likely to be disappointed.”
Our current geometric mean assumption for a market cap weighted global portfolio with Canadian home country bias is 6.92%, and for cash it is 2.88%, making our assumption for the equity premium over bills 3.93% vs. the Dimson, Marsh et Staunton figure of 3.5%.
The lesson from all this is that diversification across stocks, markets and asset classes doesn’t eliminate risk, but it can lead to better risk-adjusted returns over the long horizon.
Consider your long-term goals, risk profile, ability to take risks and time horizon when building your portfolio. Keep in mind that over shorter terms, even the most sensible investment decisions can result in temporary losses.
But riding out the volatility and sticking with your investment plan can lead to remarkable gains.
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Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.
