Generation Z to feel heat of a ‘lower-return world’

It is staggering how sharply sharemarkets have recovered from their COVID-19 induced despair of this time last year. From a low point on March 23 last year, the benchmark S&P/ASX 200 share index has surged about 53 per cent, while in the United States, the S&P 500 is up a whopping 70 per cent.

However, despite the big gains, financial experts are keen to remind us that we are now living in a “low-return world” – a result of ultra-low levels of bond yields and interest rates.

This may have particularly bleak implications for younger investors, as explained in a recent Credit Suisse report, which projected that Generation Z – those born between 1997 and 2012 – would likely experience much lower returns than the generations before them.

Credit Suisse analysed decades of financial history, exploring the relationship between returns from shares and the yields on government bonds — the “risk-free” assets that sit at the heart of the financial system.

Source: Brisbane Times, 23 March 2021