Schroders Equity Lens

Schroders

Research

68 Pages

Schroders examines whether equities can continue outperforming government bonds despite stretched valuations and a depressed yield gap. Over 155 years, US equities beat bonds by 4.8% annually, while 2026 has favored value, emerging markets, Japan, and small caps as earnings growth—not multiple expansion—drives most gains.

Key Takeaways

Equities retain edge: US equities returned 9.4% annually since 1871 versus 4.6% for long-term government bonds, a 4.8-point annual advantage.
Earnings carry thesis: Consensus US EPS growth forecasts are 32% for 2026, 16% for 2027, 16% for 2028, and 25% longer term.
Leadership has broadened: YTD through August, EM returned 24%, Japan 21%, US small caps 19%, while the Magnificent Seven returned 9%.
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