Over the long term, it is clear that stocks outperform bonds and cash. Since 1926, the compounded annual return on stocks (large cap) was 9.8%, compared with government bonds return of 5.4%.  This is including three periods of horrible equity market performance:

- the 1930s (Great Depression)
- the 1970s (Great Inflation)
- the 2000s (Great Recession)

The last 40 years show a different picture however, with stocks returning 9.5% and bonds returning 9.3%. Is this amazing risk adjusted outperformance in bonds to continue? It is unlikely.  Here is the important differentiating factor to remember going forward:

Since the early 1970s bonds had high and falling yields, but now have low and possibly rising yields.  It is important to remember that back then, US yields peaked above 15% when inflation was high. Currently 10 year US Treasuries are yielding 3.7%, and Eurozone 10 year is yielding 3.1%. The likely path of least resistance is for yields to increase (which would depress prices) or stay relatively low thus earning a yield like return.  Either way, the glory days of the bond market are behind us.