Inflation Protection and Real Returns: 75 Years of Capital Markets in Comparison

• The study examines how inflation has eroded the real value of low-interest assets over decades.
• In the past, the economic environment largely determined which asset classes performed well at which times — and which disappointed.
• The historical comparison nevertheless makes clear that, over the long term, purchasing power can only be preserved and increased through investing.

The most frequently stated New Year’s resolution for 2026 in Germany is: "Save more money." On the one hand, this shows that many Germans are willing to make their finances more resilient in times of crisis and not rely solely on the ailing pension system. On the other hand, it also reflects Germany’s tendency towards a savings-account culture, in which savings are perceived as safe but are invested at only low interest rates. In fact, according to the Bundesbank, 35–40 percent of German households’ total financial assets are held as cash or low-interest deposits. In 2025, this amounted to a substantial EUR 3.5 trillion.

Figure 1 illustrates the consequences of this investment decision. It shows the real loss of purchasing power over the past 75 years if EUR 1,000, expressed in today’s terms, had been held as cash for ten years in each case — in other words, not invested and not earning interest. For example, EUR 1,000 earned in 2015 was worth only around EUR 780 in 2025. The loss of purchasing power was particularly dramatic in the 1970s. During that period, EUR 1,000 lost more than one third of its original purchasing power. The reason for this is inflation, which gradually erodes assets that earn no or only low interest. A better resolution than "save more money" would therefore be: "build more wealth."

What might sustainable wealth accumulation look like? A look at the historical performance of various asset classes in Germany since 1950 can provide some guidance. Table 1 shows the average annual real returns, p.a., for shares in the largest German companies, government bonds, gold, real estate and cash for the years 1950 to 2025. Up to 2015, an investment period of ten years was considered; for the more recent starting years — due to the lack of complete periods — correspondingly shorter horizons were used. It can be seen that, with the exception of cash, most asset classes have historically provided good inflation protection. However, the macroeconomic environment, speculative bubbles and central bank policy had a significant impact on returns.

75 Years of Capital Markets in Germany

In the 1950s, reconstruction and the economic miracle produced exceptionally high equity returns, while bonds posted moderate gains. The 1960s brought full employment, growing foreign trade and overall calmer markets, with solid but lower real returns, while real estate benefited from strong demand. In the 1970s, the oil crisis and stagflation brought the post-war boom to an end: equities lost value in real terms, although still less than cash; gold became the clear winner after the end of the gold standard in 1971; and cash suffered massive losses in purchasing power due to average inflation rates of 5 percent.

The 1980s were marked by the fight against inflation and a Bundesbank focused on stability. In this environment, equities and bonds once again delivered attractive real returns, while gold and real estate disappointed due to higher interest rates. In the 1990s, reunification, European integration and falling inflation shaped German capital markets, with very strong results for equities and bonds. By contrast, the 2000s were turbulent: the dotcom bubble and the financial crisis weighed on equities, while bonds and gold benefited from fears of crisis. This decade was the only one of the periods considered here in which equities delivered a lower return than cash. In the 2010s, low and negative interest rates, driven by massive central bank intervention, led to a sharp rise in asset prices, particularly in real estate and equities, while cash lost value in real terms despite low inflation. Finally, the 2020s — with the pandemic, inflation shock and interest-rate turnaround — showed how costly "not investing" can be: equities and especially gold offered inflation protection, while bonds and cash generated clearly negative returns. Real estate prices also came under pressure during this period as a result of higher interest rates. 

This analysis is merely a snapshot of 75 years of capital market history in Germany. The selected entry and exit points — analogous to New Year’s resolutions — represent only one possible perspective, and the investment universe considered also reflects reality only in part. Nevertheless, the overview shows that the economic environment has historically had a decisive influence on which asset class performed particularly well in which period and which disappointed. Depending on whether growth, inflation, crises, or rising or falling interest rates dominated, the “winners” regularly changed — sometimes equities, sometimes real estate, sometimes gold. German government bonds were also long regarded as a reliable stabilising anchor in portfolios and delivered solid real returns in many phases. Only more recently have they come under pressure, first due to very low key interest rates and subsequently due to the inflation surge and the rapid turnaround in interest rates. The only real constant over the decades is the real loss caused by "not investing."
 

 MULTI ASSET AT A GLANCE
 

For Capital Market Investors

This makes the weakness of the savings-account culture clear. In order to invest assets in a way that increases their value, certain risks must be accepted. However, the step from saving to wealth accumulation does not mean putting all one’s eggs in one basket. Precisely because individual asset classes react very differently depending on the inflation environment, interest-rate level and economic cycle, broad diversification across different asset classes makes sense. This can reduce concentration risks and smooth fluctuations in the overall portfolio. At the same time, risks are inseparable from investing: prices fluctuate, markets can temporarily fall together in periods of stress, and interim losses are part of the price paid for long-term wealth accumulation. The historical comparison makes clear, however, that purchasing power can only be preserved and increased over the long term through investing. Multi-asset approaches take this finding into account by combining different sources of return and thereby making the portfolio more resilient to changing economic conditions.

This article was first published online in Börsen-Zeitung in 25. February 2026.
 

ARTICLE BÖRSEN-ZEITUNG