MW One bank crunched 200 years of data to show why it pays to stick with stocks over the long term

By Joseph Adinolfi

Over a 25-year horizon, global stocks have underperformed cash under the mattress just 0.8% of the time, Deutsche Bank found

Sticking with stocks has almost always paid off over the long term.

Given the myriad risks facing investors these days - from high valuations in the stock market to worries about an AI bubble and beyond - some might be tempted to take their money out of the market and stick it under the mattress, or at least in a savings account.

A team of analysts at Deutsche Bank showed in a recent report exactly why this would be a bad idea. And they have crunched more than 200 years' worth of data to support their conclusion.

Using the bank's global data set, which includes returns for stocks trading in 56 countries over the past two centuries, the Deutsche Bank team found that over a 25-year period, stocks have underperformed "cash under the mattress" just 0.8% of the time.

Most of those instances occurred in Ireland during the early to mid-19th century, the team found. But the result has happened more recently in developed equity markets, as well: Investors who bought Japanese stocks at the market's peak in 1990 waited more than 30 years to recoup their money.

"Negative nominal 25-year equity returns are therefore exceptionally rare and largely idiosyncratic," the Deutsche Bank team said.

The numbers were slightly less favorable when adjusted for inflation, although the historical record still overwhelmingly supports sticking with stocks. In real terms, they have underperformed cash just 7.5% of the time.

Negative equity returns were more common over shorter periods. For example, 13.6% of all five-year periods have seen stocks decline on a nominal basis, a pattern observed across nearly all markets in the Deutsche Bank data set.

According to Deutsche Bank's Jim Reid, who shared the above charts with MarketWatch on Wednesday, one of the most reliable indications that stocks were about to enter a period of weak returns has been high valuations. Reid pointed to elevated CAPE and price-to-earnings ratios as two notable examples. Both could be considered lofty today. The higher these ratios go, the more investors are paying per dollar of corporate earnings. A lower ratio indicates investors are getting a better deal.

According to FactSet, the forward price-to-earnings ratio for the S&P 500 recently topped 23, putting it at its highest level in years and well above its five-, 10- and 15-year averages.

Low dividend yields for stocks were another tell, Reid said. The S&P 500's recent dividend yield has almost never been lower.

The probability that stocks will underperform a portfolio of bonds or short-term government notes has been slightly higher. Bonds bested stocks over the long term 22% of the time.

"Entering at the wrong point in the fixed-income super-cycle can lead to extended periods of weak real returns," Reid said.

On Tuesday, concerns about lofty valuations and a selloff in more speculative corners of the market helped bring about the worst day on Wall Street since Oct. 10. On Wednesday, U.S. stocks were trading mixed after the opening bell, with the S&P 500 SPX unchanged, the Nasdaq Composite COMP marginally lower and Dow Jones Industrial Average DJIA trading higher.

-Joseph Adinolfi

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November 05, 2025 10:01 ET (15:01 GMT)

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