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50 years: Investment returns vs inflation vs crises

TCFP’s founder, Jeremy Askew, turned 50 in June. Let’s look back over the conditions for, and return from, investments over those 50 years.

As investors there has been a continuous stream of events to navigate. For example, here is a list of major economic crises since 1972:

1970s energy crisisEarly 2000s recession
OPEC oil price shock (1973)Dot-com bubble (2000–2002) (US)
1979 energy crisis (1979)2001 September 11 Attacks
Secondary banking crisis of 1973–1975 in the UK2007–2009 Financial Crisis
2008–2011 Icelandic financial crisis
1980s2008–2010 Irish banking crisis
Early 1980s Recession
Japanese asset price bubble (1986–1992)2010s
Black Monday (1987) (1987) (US)European sovereign debt crisis (EU) (2009–2019)
Savings and loan crisis in the U.S.Russo-Ukrainian War (2014-now)
2014 Russian financial crisis
1990s2015 Chinese stock market crash
Early 1990s Recession
Black Wednesday (1992)2020s
1997 Asian financial crisisCOVID-19 recession
1998 Russian financial crisis2020 stock market crash (2020)

Each crisis informed what came next and was, the seed for future crises. What strikes us is that, on average, there is a significant economic crisis every other year.

There are also significant political and humanitarian crises to consider too. They often influence investors behaviour. We are talking about disease outbreaks, wars, political scandals, Brexit, the end of communism etc. We could easily think of at least 25 over the last 50 years, couldn’t we?

Now we have a meaningful crisis every year on average if we combine financial, political and humanitarian. Unrelenting, isn’t it? Best take those “it was so much better in the [insert decade of your choice]” exclamations with a pinch of salt, hadn’t we?

We should not stop there though. What about doom mongering? Predictions, whether they happen or not, affect investors, and that matters. CLICK HERE for an article listing various predicted disasters that never came to pass. Many more disasters are predicted than happen, shall we add 50 over the last 50 years?

So, over the last 50 years we have had to contend with two (real or imagined) crises per annum. As the cherry on our miserable cake do not forget inflation, the ever-present wealth destroyer.

According to the Bank of England it has averaged 4.7% pa over the last 50 years in the UK.

Pretty tough conditions for investing, weren’t they? We were assailed on all fronts, decade after decade, having to deal with constant headwinds and avalanches of bad news. We had every excuse imaginable, every year, not to invest.

But, despite everything that has happened, owning the biggest and best companies around the world earned you just shy of 8% pa on average over the last 50 years, 3% more than inflation.

Allowing for costs, being an owner of these companies has doubled your money, on average, every 10 years.

£10,000 in 1972 would have become £320,000 today. To buy the same things in 1972 for £10,000 you would need £95,000 today.

Being an owner of big, successful companies has earned you an after-inflation profit of £225,000.

We repeat – that is despite everything, real and imagined that has happened.

We have no doubt that the same will happen over the next 50 years. There will be crises, real and imagined, the world will change beyond all recognition and the best companies around the world will continue to get better and better.

Why would you bet against that? To do so is the gamble of all gambles.


Boring But Effective | Truthful, Helpful, Kind 

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