In these times of widespread gloom and doom, it makes sense to take a step back in history and see how equity and bonds did perform under extreme conditions. So we look at Switzerland, which has enjoyed one of the most solid economy over the past hundred years, and Japan, which has experienced extreme geopolitical dislocations.
Thes two charts show the nominal and real return on assets classes for Japan and Switzerland, from 1900 to 2000.
It is interesting to compare the impact of inflation and currency dynamics on domestic bonds and equity. Although Japan recovered spectacularly after WW2, many fortunes, savings and hopes were wiped out in the process.
On the other hand, Switzerland's political and economic stability provided a fertile ground for steady asset class returns, currency strength and controlled inflation.
Nominal and Real Returns on Japanese Asset Classes: 1900-2000
Nominal and Real Returns on Swiss Asset Classes: 1900 - 2000