The historical average rates of return on stocks, long-term Treasury bonds, intermediate Treasury bonds and Treasury bills have reached their highest levels since the 1920s, according to data taken from newly released statistics of Ibbotson Associates Inc., Chicago.
Inflation also averaged its highest annual level during the same time.
At year-end 1998, the stock market returned an average 11.2% a year for the 73-year period beginning in 1926. That is the highest historical average annual return of any calendar-year period dating to 1926, except for the period confined only to the 1920s.
The stock market is defined as the return of the S&P 500, including dividends reinvested.
For the same 73-year period, the return on long-term and intermediate government bonds both averaged 5.3%; and on Treasury bills, 3.8%.
For long-term government bonds, with maturities of 20 years, the 5.3% historical average is the highest ever, except for periods in the 1920s. The 5.3% historical return on intermediates, with maturities of five years, equals the highest annual average first hit in 1993 for periods started in 1926.
For Treasury bills, with maturities of 30 days, the return was their highest historic annual average.
For inflation, the 3.1% historical average rate equals the rate first hit in 1988 for periods started 1926.
Since the start of the current bull stock market in 1982, the historical average has gone up by more than 2 percentage points a year. At year-end 1981, the market's historical average return was only 9.1% a year from 1926.
Small-cap stocks returned 12.4% from 1926 through 1998, down from their highest annual average historic return of 12.8% in the period of 1926 through 1983.
Long-term corporate bonds, with 20-year maturities, returned 5.8% from 1926 through 1998, their highest annual average historic return since the period of the 1920s, 1930s and 1940s.
