SocGen’s Andrew Lapthorne has found “the most depressing chart ever”.
And that’s saying something, because Andrew is a colleague of Albert Edwards, which means he’s seen some pretty “depressing” charts in his time.
“Once in a while we create a chart that is truly depressing”, Lapthorne wrote in a Monday note, on the way to explaining the following visual which “measures the percentage of global developed and emerging market stocks that have beaten the S&P 500 on a total return USD basis over one and two years”.
As you can see from the chart header, that’s a pretty big sample. Out of 16,000 stocks, just 22% of them have managed to beat the S&P over the last two years.
The picture has brightened a bit over the last one year, with “just” 66% of stocks underperforming, but the message is clear: If you want to do well, just pay 9bps (or whatever it is now – maybe it’s less) and buy an S&P index fund.
Obviously, that bodes extremely poorly for active management, something Lapthorne points out.
But more importantly, he says this:
If the measurement of company success is outperforming the 500 largest-cap US businesses supported by the US Federal Reserve, debt-funded share buybacks, and increasingly sophisticated financial products, then you can understand why less business are going public and private equity is booming. I find this depressing.