During the World Wars and Cold War (1914–1981), real bond returns were often negative, while equities fared better, lifting the realized ERP, according to the report. In the globalization era (1981–2025), both stocks and bonds delivered strong real returns, compressing — but not eliminating — the ERP. The report demonstrates that the differences reflect inflation dynamics, trade openness, and the degree of state intervention. The ERP tends to widen in inflationary regimes, primarily because bonds and bills suffer severe real losses, not because equities boom. When inflation breaks, equities can recover some real value; fixed-income losses are largely permanent.
Private vs. public capital
The monograph tracks the balance between private and public capital via the ratio of equity market capitalization to government debt. It says that peace-and-trade eras allow equity capitalization to outgrow public debt, while war and heavy state direction reverse the balance. For example, in 2024, market cap exceeded government debt in the United States (~156%), United Kingdom (~142%), and France (~142%).
Today’s regime: “Technology Wars”
Since 2020, governments have used tariffs, sanctions, and controls to secure leadership in AI, chips, biotech, and energy. Pandemic-era stimulus and supply frictions produced the sharpest after-inflation bond losses in modern developed-market history (2021–2023), while equity leadership concentrated in technology, communications, and health care. Investors should expect bond headwinds and a higher realized ERP — largely because fixed income is weak.
Growing global synchronization
Markets around the world now move together much more than they used to. Information travels instantly, so shocks in one country quickly spill into others. As a result, bull and bear markets often start and end at the same time across countries, and regime shifts spread faster. This tighter linkage leaves investors less time to react and makes early recognition of turning points far more important.
