t-bills

Return on Gold, Stocks, Bonds, and Bills since 1928

How risky is gold compared to other assets? For most of the of the United States' history  gold's price was set by the government (given that the value of the US dollar was often pegged to gold). In this graphic, I have taken the annual price change of gold back to 1928 and compared it to the returns on stock, bonds and t-bills.

Since the early 1970s when the US completely abandoned the gold standard, gold's price changes has made it very volatile and if we look at the annualized compound return from 1976-2012 (gold 6.6%;  stocks 10.9%;  10-year bonds 8.1%;  3-month t-bills 5.1%). Gold returns was just little better than 3-month t-bills. However if we look at the annualized return for 1928-2012: gold's return of 5.3% beats t-bills at 3.6% and bonds at 5.1% but still underpreforms stock's return of 9.3%.

Gold Data from MeasuringWorth.org. Stock and treasury bonds data from Damodaran Online | Updated Data | Historical Returns on Stock Bonds and Bills - United States. CPI from Measuring Worth

Graphs created in OmniGraphSketcher then pasted into Illustrator

 

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Rolling Real Returns: Stocks, Bonds and Bills since 1928

Revisited the Stock, Bonds and Bills data from my previous post, I created a set of real (inflation adjusted) average annual compound returns for rolling time periods (e.g. rolling 5-year returns: 1928-1933, 1929-1934, 1930-1935 etc...) I also included the  average annual compound real return for 1928-2012: stocks 6.0% 10-year bonds 2.0% and 3-month bills 0.5%

Some of the outliers in these returns are due to bubbles. For example stocks in the late 1920s, mid-1930s and late-1990s had unusual large real returns with a corresponding drop. See Long-term Growth Rate of US Stocks)

Return Data from Damodaran Online | Updated Data | Historical Returns on Stock Bonds and Bills - United States CPI from Measuring Worth

Chart created using OmniGraphSketcher; labels added with Adobe Illustrator. 

 

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Annual Returns of Stock, Bond, and Bills since 1928

Here is a simple graph comparing the variation of annual returns for US stocks, US 10-year bonds and US 3-month t-bills. I have included both nominal returns (not adjusted for inflation) and real returns. 

Stocks are of course the most risky of the three with both the highest and the lowest  returns then comes 10-year bonds and finally t-bills with the smallest but the most consistant returns. However, after 3-month t-bills are adjusted for inflation there are many years you will "lose" money. And in years with deflation, your real return will be larger than the nominal return (i.e. you did better holding stocks in 1933 when you take into account the effects of deflation in that year while 1954 had the highest nominal stock return).

Return Data from Damodaran Online | Updated Data | Historical Returns on Stock Bonds and Bills - United States CPI form Measuring Worth

Chart created using OmniGraphSketcher; labels added with Adobe Illustrator. 

 

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Difference between US 3-Month T-bills vs Fed Funds: 1956-2008

Interest Rates and Fed Funds

I plotted the historical spread between Effective Fed Funds rate and US 3-Month T-bills back to 1956 using the weekly average. This a companion graph to Anatomy of a Financial Crisis: September 2008 

Data from Federal Reserve Bank of St. Louis

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