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What was the worst outcome ? (equities vs bonds)

what time period? it's all a function of your significant time horizon. the bond data is difficult because there were few longer term (greater than one year) government bonds until the 1960's. i think it was the nixon administration in the early 1970's that invented the 30 year US treasury bond, up until that time US debt was 10 years or shorter, i believe. so the bond data becomes somewhat of a mixed bag in terms of credit quality and duration, especially pre-WWII. in fact, short term US government debt often sold at an interest rate below the inflation rate in the 1940's, 1950's and early 1960's. the S&P500 dividend rate exceeded the interest rate on US treasuries for many years in the two decades after WWII. this paradox is explained by people's risk aversion relative to another deflationary great depression, which many conservative investors believed would "inevitably" happen after WWII, since every war up to that time had experienced a major deflationary depression period following the war (1812, Mexican War, Civil War, Spanish-American, WWI). the negative real return on treasury debt was considered a capital preservation "insurance premium" by most financial advisors. hard to believe these days, but pre-Vietnam, pre-Watergate, this was a very different country. the hyper inflation of 1973-1980, really changed the way bond investors viewed US debt.

What was the longest period for a loss in real value in the stockmarket ? For example, if I invested $100 just before the 1929 crash, how long did it take for my investment to recover to its real value ?

this one is complicated. the answer depends a lot on how you treat dividends and taxes. the conventional answer that many people throw out is that it took until 1954 to "get even" after the top in 1929, but that answer is just the S&P500 price index, and does not include the effects of deflation/inflation and dividends. if you factor in deflation/inflation, and exclude dividends the number is 1959. if you include deflation/inflation plus all dividends as being reinvested quarterly and ignore taxes/fees, you actually got back to "even" briefly in 1937. however, the market then dropped hard for 4 years. you got back to "even" again in 1945, but then the "broke even" for good and the market in real terms "broke out". if you take a tax/fee bite out of dividends, the answer lies somewhere between 1949 and 1959 (20-30 years) . however, it is not quite as dire as it sounds because in real terms with dividends, the market bounced around within 10-20% of its 1929 high for the entire 1937-1949 period and in those terms (real plus dividends) the april 1937 high was higher than 1929 and the 1946 high was higher than the 1937 high. in deflation/inflation adjusted terms, the 1932-1937 rally was one heck of a rally.

What was the largest loss in real value ? I read an earlier post in this forum that equities lost 75% of their real values twice in the last century ? When did these losses occur and how long did they last ?

the dow industrials, price index (no dividends) lost more than 75% of its real value in 1929-1932, and again in 1968-1982. the dow lost 90% of its nominal price value in 1929-32, but because of deflation in 1931 and 1932, the real return ex-dividends was -77%.

ex-dividend, the S&P500 lost 57% of real value in the 1968-1974 period, and it lost 63% in real terms ex-dividend in the 1968-1982 period. without dividends, it took until 1992 to "break even" in real terms with the 1968 high. (24 years vs. the 30 years in the first example). with dividends, ignoring taxes/fees the 1973 high was higher than 1968 and 1985 was higher than 1973. so the actual answer (with inflation and dividends and taxes/fees) to the "break even" question for the second period (post 1968 market high) lies somewhere between 1985 and 1992.


-tr
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