UK Stock Market from 1709

ukstocks1709

So here it is in all its glory, thanks to fascinating, excellent Bank of England research.

Three Centuries of Economic Data

I have not inflation adjusted the data but will get round to that.  My object was to see whether a simple asset allocation strategy (switching from stocks to bonds on a momentum basis, monthly, based on lookbacks of between one and twelve months) looked viable on deep history.

What nonsense we see out there on the net: back tests based on nanoseconds, delusional traders trying to convince themselves they have spotted the way to Eldorado and eternal happiness and wealth.

I will publish my tests at some other time. Meanwhile observe the glories of the South Sea Bubble in 1721. And the Great Crash of 1929.

Marvel at the long periods of almost zero growth.

Observe the greatly accelerated growth in the first three quarters of the 19th Century and the second half of the 20th Century.

Next time you read the drivel in the press or the nonsense spouted by fund managers reflect on this chart. Ignore the latest fad, the bold predictions based on derisory back tests and 5 year track records.

Take the long view and hope that we are still in a period of high growth. Spread your assets widely. Avoid complexity. And keep your fingers crossed.

 

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2 Comments

  1. Best post on the internet. God, what a kick of sense as I’m working on a machine learning script! Thanks for sharing.

    Like

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