Investment

Next year will be a good one for anniversaries. A century since Lloyd George’s People’s Budget, 60 years since Attlee’s devaluation, 25 since inflation swept away the ha’penny coin and £1 note. And it’s the golden jubilee of the reverse yield gap.

Yet the reverse yield gap will not be present at its own celebrations. This pillar that has supported the basis of equity investment for the past half-century has suddenly disappeared. Since 1959, shares have consistently yielded less than gilt-edged stocks. But now it is government bonds that are again paying the higher return. The reverse yield gap has reversed.

Until that day 50 years ago, when Cliff Richard and the Shadows topped the hit parade with ‘Living Doll’ and the Mini had just been launched, it had been carved in stone that shares yielded more than gilts. To the Victorians and their successors, it was obvious there had to be a yield gap: equities were riskier than government stocks.