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Where the real returns have been for the SA investor

Most international stock exchanges, when measured and converted into rands, beat SA inflation.

When my analysis of the compounded real returns of South African asset classes was published earlier this week, I was swamped with messages that one must look at international assets too.

I again used data from 1969 to 2018 (where available) on an annual average basis. The returns were converted to rands.

The S&P 500 returned 17% in nominal rand terms and the FTSE 14.9% (partly price only) compounded per year. This beats the JSE’s total returns in nominal terms, which were 13.5% in the 50 years to 2018.


But the big surprise is that Swedish stocks showed the best returns compounded over the 50 years and returned 18.2% per year in rand since 1969.

To put that in context, if you had invested R100 in the Swedish stock exchange in 1969 your money would have been worth R365 739 today! That is a return of over 3 656% in those 50 years. The S&P 500 would have changed your R100 to R216 269.

So, while US stocks generally did far batter than most, there were periods where other markets outperformed.

Inflation …

But as we know, while returns can be high the biggest risk for investors over time is inflation.

If you invested R100 in Sweden’s stock market in 1969, the value today after accounting for inflation would be R4 973 – a brilliant return by any measure. Put differently, if you had invested 1.4 cents into that stock exchange in 1969, your money would be worth R4 973 today.

For the S&P 500, it would be worth R2 941 today. For the DAX, it would be worth R657 while the JSE would have returned R664.

Clearly, international stock markets beat the JSE generally over the very long-term. However, for the last few years, the FTSE struggled to deliver returns too. 

Interestingly, all international stock exchanges measured and converted into rands beat SA inflation in the long run but lost some massive ground over short periods of time which, in this context, is years.

Table 1: After-inflation returns in rands from international equity indices compared to the best SA returns for all SA asset classes over the period 1969-2018

Compounded return over: Sweden Germany S&P FTSE Best SA return
Last 25 years 8.3 4.3 9.3 4.2 4.8
Last 15 years 8.1 4.9 8.1 6.1 7.4
Last 12 years 5.8 0.3 7.9 5.5 3.9
Last 10 years 11.1 6.2 14.6 7.9 4.3
Last 5 years 13 2 11 8.5 1.9
Last 3 years -1.8 1.2 5.1 -3.3 4.3
Last 1 year -2.9 -2 7.5 -8.3 4.6

Note: Bank for International Settlements (BIS) for exchange rates and S&P/Shiller total net returns of the S&P 500. Macrobond for German and Swedish stock base is IMF for these two but last few years is from Macrobond. Note: FTSE is from FTSE but is price-return only in the first decade. The data is therefore spliced in some cases and is not 100% accurate but can be used for comparison.

Bonds and cash a step down in delivering returns

The risk factors in stock markets are considered far higher than other asset classes such as cash and bonds. The return for these assets is also lower.

The returns of UK bonds and cash have been negatively affected by recent developments such as low interest rates and the declining value of the pound sterling.

US 10-year bonds have delivered the best nominal and real return over the full 50-year period in South African rands. Much of the impact is, of course, the weaker rand but US government bond yields were much higher than now during much of the 1980s.

Remember, South African bonds delivered a 2.1% return over the 50-year period while US government bonds delivered 3.4% as a compounded annual rate in rands after SA inflation.

US government bonds are considered the world’s most risk-free assets as the US is the dominant currency and the biggest economy in the world. These bonds over the long run have performed the best, in my mind, even when adjusting for all sorts of risk.

But the big difference is that SA bonds and SA money markets have outperformed their international counterparts for most of the last 25 years.

With many bonds now delivering negative nominal returns in Europe and elsewhere in the developed world, SA bonds are a clear winner in terms of returns.

We have higher risks for sure, but we also have a solid financial architecture that is good at pricing in risks.

When considering near 4% returns on a compounded-after-inflation basis over the last 10 years, SA bonds have really done well.

Table 2: International bond and money market compounded annual returns from 1969 to 2018 in rands after accounting for SA inflation

Compounded return over: US 10-year US deposit GBP deposit GBP 10-year
Last 50 years 3.4 2.2 3 5.9
Last 25 years 3.6 2.1 2.1 4.3
Last 15 years 2.5 0.8 3.2 4.7
Last 12 years 2.5 0.4 4.6 6.2
Last 10 years 2.3 0.3 2.4 3.7
Last 5 years 2.2 0.7 5.9 6.8
Last 3 years -7.3 -8.3 -8.6 -7.9
Last 1 year -2.3 -3.3 -7.7 -7

Note: All bonds and money market returns are also compounded, but yields only to maturity as recorded by annual averages by the US Federal Reserve and the Bank of England. BIS used for average international dollar exchange rates per annum.

So far, SA has never defaulted (we came close in the mid-1980s) and we are likely to see more turmoil in our bond market. Basically, SA bonds and cash return far better results after prescribed assets were dropped and a fairer market accounted for inflation.

Having said that, the international bond and money market is returning losses at present – and for the money one wants to put in lower-risk asset classes, then one would certainly have a fair share of that in SA. (In a way the returns are like SA during prescribed assets in real terms … makes one think.)

Overall the picture in my mind so far is that one may want to invest more heavily in international equities than SA equities, but one would want to keep the more risk-averse money in SA cash and bonds.

One may also need to look past just stocks, bonds and cash as gold and other commodities are perhaps also a play in a world with so many destructive forces at play.

Negative international interest rates are certain to cause massive losses for the many who rely on them for income.

I can see no positive outcomes from a world so awash with debt and negative rates that one has to consider other asset classes. Hedge funds also come to mind but my problem is to differentiate between their strategies and thoughts. Cryptos are still a risky bet.

But history does show that weakness in stock prices for a year or two is often also a good time to invest. History so far also shows that diversity of assets is a better play than one place or one asset only.

May these numbers open thoughts and discussion from at least a more data-rich perspective.


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the returns are heavily influenced by this decade. Eg look at S&P 12y and 10y difference n CAGR. Global equities crashed badly exactly between the ten and the twelve marks and then rebounded fen years straight.

People should externalize but now is an expensive time

Very true particularly for USA stock markets. But on the other side that destroyed much of the returns from bonds as they were a terrible investment for most investors around the world. But longer Run data is an indication that equities tend to beat bonds and that is something important for investors to note.

Mike your JSE ALSI returns are wrong.
Eg. 25 year total real returns in R for JSE ALSI was 7% pa (you show 4.8%)
The 25 year 9.3% real annual Rand return you show for the S&P500 gets close to the 9% I calculate (also from Shiller’s data).

Mike, did you look at the Dimson, Marsh, Staunton data which has over many years previously showed SA as producing the best real returns? Their data set is over 100+ yrs though. I can’t remember though if it showed all real returns in USD or local currency! And also, given our poor recent 5years how this impacts the numbers.

No, I did not. I did my own data using the SARB quarterly bulletins as they showed how SA indices were at the time then. I know that the USB guys said same but I believe our returns normalised when SA investors could take money offshore at least a lot more. I think the JSE was a great investment for many years but has in recent time not fared too well As did others in emerging markets. Remember also Rand returns via say the US has a built-in 6,14% currency advantage annually compounded in nominal terms

Are you using the index for the JSE, but total returns for the S&P500. If so you are not comparing like for like. Dividends are a crucial component of returns.

Am using Index annual average and dividends paid annual average.

Hi Mike,

Did you adjust the foreign market returns by each countries inflation rate, or all by SA inflation rate?


By SA inflation rate after I had converted to Rands using Bank of International Settlements data for annual average exchange rates. That way all are in Rands ex SA inflation.

Great article! Thanks Mike!

Nice analysis. The times are changing though and we need more analysis on new asset classes that are hammering traditional investments by an exponential margin.

By way of example:
For $1 Invested 10 Years ago, today you would have made (cumulative):

JSE ZAR: 65%
JSE USD: -2%
NASDAQ: 127%
NYSE: 56%
FTSE: 30%
BTC: 10568%

And, after 5 years, S&P at 14.6% would give 98% compounded annually.

Yes, because 10 years ago, BTC was a totally viable investment right?

Let me guess, you buy a lot of ?hit coins today.

Child-like analogy. This is why people struggle to take you lot seriously.

For sure but not with new money – the profits have been made and will continue to grow well beyond the “?hit” you invest in;

You can stick with your ZAR USD EUR GBP and the like while I just Smile…

For anyone in the markets today or with money to invest the horizons are really 10 years in the past and 5 years in the future. The rest is academic.

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