In the latest Credit Suisse Global Investment Returns Yearbook, the investment bank said that over the last 123 years, Australia has topped the list for equities markets.
Published by the Credit Suisse Research Institute in collaboration with London Business School, the report covers all the main asset categories in 35 countries, most of which have 123 years of data since 1900.
Michael Marr, head of wealth management at Credit Suisse Australia, said: “The yearbook shows what an unusual year 2022 was for returns. Unlike the previous 20 years, bonds did not act as a hedge for weak equity markets. That said, the long-term data over 123 years shows it is not unusual for both bonds and equities to be negatively impacted, in periods of high inflation.
“After a sharp adjustment, the Australian bond market has entered 2023 with a more attractive yield and higher likelihood of diversification benefits for our clients. The environment is now more conducive to multi-asset class investing.”
The report found that since 1900, Australia has been the best performing stock market in real US dollar terms with an annualised real return of 6.43 per cent, with the US close behind at 6.38 per cent.
Andrew McAuley, Australia chief investment officer at Credit Suisse Wealth Management, said: “The Australian equities market maintained its leadership in terms of USD returns since 1900. Expressed in local currency terms (AUD), our market ranked second with an annualised real return of 6.7 per cent.
“Importantly for Australian investors, out of the 35 countries included in the analysis, covering 98 per cent of the world market capitalisation, the Australian market had the second lowest volatility after Canada.
“Our bond market produced an annualised real return since 1900 of 1.6 per cent in AUD terms, well above the all country average of 0.6 per cent p.a.”
The Australian equity market occupies the ninth place globally in terms of size, while the US market topped the list, accounting for over 58.4 per cent of total world equity market value.
“Looking forward, the authors see reason for continued optimism. Australia finds itself in the fortunate position of being the world’s largest exporter of coal, iron ore, lead, rutile and zinc; and the second largest of gold and uranium. More critically, we are the largest or near largest producer of the raw materials needed to facilitate the transition to zero carbon, being lithium, aluminium, nickel, LNG and rare earths,” Mr McAuley said.
“Australia has a large, well-capitalised finance sector and extremely large savings pool in the form of $3.3 trillion in superannuation.”
He added: “The results show based on history, and expectations for the future, Australian investors should continue to target a long-term strategic asset allocation that generally holds a local bias, augmented with significant exposure to the best opportunities the rest of the world can offer.”
