Capital Markets: Observations & Insights

Risk Relative to Time Horizon

• Equity returns look much less volatile over a longer time period than shorter time periods

‒ Using 20-year rolling returns, the relative standard deviation is actually lower for stocks than for bonds

60

Range of Stock and Bond Total Returns

52.3%

Stocks

50

Bonds

40

29.1%

28.6%

30

18.6%

17.9%

17.0%

20

12.8%

10.0%

10

6.5%

3.2%

0

Annual Total Returns

1.0%

1.8%

-1.7%

-2.4%

-5.1%

-10

-20

-30

-40

-37.0%

1-Year

5-Year Rolling

10-Year Rolling

20-Year Rolling

Source: Morningstar. Stock data is the S&P 500 total return and bond data is the Ibbotson Associates US IT Govt total return. The data spans 1950-2015.

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