The 2010s were characterised, at least in the West, by generally sluggish nominal GDP growth, negligible inflation and rock-bottom interest rates. But the 2020s have felt very different, as inflation has reared its head, nominal GDP growth has been faster and interest rates have shot up and then started to crawl lower,” says AJ Bell investment director Russ Mould.
“Given the change in backdrop, it would be sensible to expect portfolio builders to respond with different asset allocation strategies, and the 2020s show signs of a clear shift away from long-duration assets and options that offer steady income and purportedly more predictable cash flows to cheaper, more economically-sensitive options and ‘real’ assets rather than ‘paper’ promises.
“This switch from the low-growth, low-inflation, low-interest-rate murk which characterised the post-Great Financial Crisis era of the 2010s to one of higher inflation, higher nominal growth and more volatile interest rates does seem to be prompting a re-think when it comes to strategic asset allocation. Assets which did well across the period from 2010 to 2019 will have also become more expensive, in absolute terms and relative to other options, while the opposite holds true in many cases for those that did less well, or just flat out badly.
“Government bonds, in theory a ‘safe’ option, have fared badly, thanks to higher inflation and higher interest rates, as well as worries over the supply of paper at a time when Western regimes are struggling to rein in annual budget deficits, let alone aggregate ones.
| Capital return in sterling terms | ||||
| 2010s | 2020s to date* | |||
| Bitcoin | 90,442.2% | Bitcoin | 733.5% | |
| Growth equities | 466.5% | Silver | 303.9% | |
| Value equities | 189.8% | Gold | 215.2% | |
| Global equities | 130.5% | Growth equities | 177.5% | |
| Global corporate bonds | 82.3% | Commodities | 89.9% | |
| Gold | 69.1% | Global equities | 80.8% | |
| US dollar | 50.9% | Value equities | 60.4% | |
| Global government bonds | 46.4% | Emerging Market equities | 36.9% | |
| Emerging Market equities | 37.3% | Natural Gas | 36.7% | |
| Silver | 29.1% | Global high yield bonds | 31.7% | |
| Brent crude oil | 4.4% | Global corporate bonds | 8.4% | |
| Commodities | (15.3%) | Brent crude oil | (0.2%) | |
| Natural Gas | (21.1%) | US dollar | (1.1%) | |
| Global government bonds | (8.2%) | |||
Source: LSEG Refinitiv data. *2020s up to the close on 17 February 2026.
“Valuation is the ultimate arbiter of investment return after all, since the plan is to buy low and sell high, even if momentum-oriented strategies and buying high to sell higher brought handsome rewards in the 2010s.
“The issue of valuation, relative or absolute, is making its presence felt this decade, and the past 12 months show an even stronger move away from the trends and portfolio options which provided the best returns in the 2010s.
“Silver and gold top the performance table in the year to this February, after a dull decade for the former, at least in the 2010s, while emerging market equities and ‘value’ equities, as benchmarked by the Russell 1000 Value ETF (IWD), have come to the fore. Bitcoin has flopped to the bottom of the list in the past year, and the dollar has remained weak. Only crude oil and natural gas have shown no inclination to show any great divergence from the 2010s in the 2020s, and this is probably no bad thing from the point of view of the other asset classes, given the implications for inflation and interest rates of a spike in the price of hydrocarbons.
| Capital return in sterling terms | |
| Last 12 months | |
| Silver | 109.1% |
| Gold | 57.3% |
| Emerging Market equities | 28.5% |
| Global equities | 10.4% |
| Value equities | 7.2% |
| Growth equities | 4.8% |
| Global corporate bonds | 3.4% |
| Global government bonds | 0.9% |
| Global high yield bonds | 0.4% |
| Commodities | (5.8%) |
| US dollar | (14.9%) |
| Brent crude oil | (16.7%) |
| Natural Gas | (23.6%) |
| Bitcoin | (34.2%) |
Source: LSEG Refinitiv data. *As of the close on 17 February 2026.
“Similarly unsubtle shifts in where portfolios have needed to go to get the best returns can also be seen in how different equity markets are coming to the fore in the 2020s, in comparison to the 2010s.
“In the 2010s, it was America first and almost the rest nowhere as low growth, low inflation and low interest rates put a premium on secular growth and pricing power – facets which US technology companies could offer with aplomb.
“Japan’s Nikkei 225 did its best, thanks to Abenomics and a weaker yen, as did India’s Sensex index, helped by powerful demographic trends, rapid economic growth and a strong technology sector all of its own, especially in the field of software. But China and Brazil lagged as the BRICs concept of the 2000s fell out of favour. The former was hindered by the bursting of an equity bubble in the middle of the decade, the latter by weak commodity prices, a surge in inflation and interest rates that rose from a low of 7.25% in late 2012 to a peak of 14.25% by summer 2015.
“The early stages of the 2020s did not, in some ways, look too dissimilar, although India joined China as playing a tortoise to America’s hare. Lofty valuations and worries over the implications of AI for software have hurt Mumbai’s Sensex benchmark, while Beijing has had to deal with the implications of a real estate bust rather than an equity market collapse this time around.
| Capital return in sterling terms | ||||
| 2010s | 2020s to date* | |||
| NASDAQ | 382.0% | NASDAQ | 146.9% | |
| S&P 500 | 253.2% | S&P 500 | 107.8% | |
| Nikkei 225 | 134.2% | KOSPI | 96.7% | |
| DAX | 112.1% | DAX | 94.8% | |
| SSMI | 111.1% | TSX 60 | 74.9% | |
| BSE Sensex | 87.7% | Nikkei 225 | 67.4% | |
| KOSPI | 60.3% | SSMI | 59.0% | |
| Stoxx Europe 600 | 58.0% | Stoxx Europe 600 | 52.4% | |
| Hang Seng | 56.3% | CAC 40 | 44.4% | |
| CAC 40 | 44.8% | FTSE 100 | 40.0% | |
| TSX 60 | 44.3% | Shanghai Composite | 32.3% | |
| FTSE 100 | 39.3% | Bovespa | 21.8% | |
| Shanghai Composite | 11.2% | BSE Sensex | (1.6%) | |
| Bovespa | (10.9%) | Hang Seng | (7.3%) | |
Source: LSEG Refinitiv data. *2020s up to the close on 17 February 2026.
“But the picture has changed dramatically in the past 12 months.
“US equities have begun to lag, weighed down by high valuations, gathering worries over what sort of returns can be made from a colossal spending spree on AI infrastructure and a weaker dollar, let alone presidential policy caprice. Emerging markets have taken the lead, having started at a much lower valuation point and taken strength from the decline in the greenback and gains in raw material prices, although Korea’s boom owes much to the AI exposure afforded by the memory chip prowess of index heavyweights such as Samsung Electronics and SK Hynix.
“Even the Shanghai Composite is making a better show of it, as is another serial laggard, the UK’s FTSE 100. That index’s preponderance of banks, miners and oils rendered it totally unsuitable for the low-growth, low-inflation, low-interest-rate slop of the 2010s, but that profile, coupled with a relatively attractive valuation and bumper cash returns from dividends, buybacks and merger and acquisition activity, has been much better suited to the more volatile 2020s.
| Capital return in sterling terms | |
| Last 12 months | |
| KOSPI | 96.5% |
| Bovespa | 48.2% |
| Nikkei 225 | 34.1% |
| FTSE 100 | 20.4% |
| TSX 60 | 19.9% |
| Shanghai Composite | 19.3% |
| Stoxx Europe 600 | 17.7% |
| SSMI | 16.1% |
| DAX | 15.4% |
| Hang Seng | 8.0% |
| CAC 40 | 7.4% |
| NASDAQ | 5.3% |
| S&P 500 | 4.3% |
| BSE Sensex | (1.6%) |
Source: LSEG Refinitiv data. *As of the close on 17 February 2026.
“US equities still look expensive relative to their history, whereas emerging markets, Europe and Japan look less stretched.
“Any unexpected shock could yet see markets seek out the safety of the world’s reserve currency, the dollar, and its largest economy, America, to the relative detriment of other arenas, while an economic downturn could conceivably bring government bonds back into favour. However, the prospect of a recession increasing welfare payments and decreasing taxation revenues, all other things being equal, might not sit well, given the West’s already substantial sovereign debts.
“Under such a gloomy scenario it may take a fresh round of financial repression, in the form of artificially low interest rates and Quantitative Easing from central banks, to tempt investors back to sovereign fixed income. Though would-be buyers of bonds could be one of the few groups who might welcome a disinflationary shock that stems from any AI productivity boom.”
