Global equities to grow at 3 per cent pa over next decade

Global equity markets will grow by 3 per cent per annum over the next 10 years in a period of “below-normative economic growth” and weak inflation, according to research by Societe Generale (SG).

SG’s research on the impact of inflation on equity markets predicts that the S&P 500 would rise by 3 per cent per annum and reach 1,300 points in 10 years.

“There will be a gradual return to more normal growth trends globally sometime in 2010, with growth reaching cruising speed of 3 per cent in real terms from 2011, a weaker pace than in previous years,” it said.

It also predicts the gradual return of inflation in the global economy over the next 10 years, with prices of goods and services possibly increasing by around 27 per cent.

However, SG also produced three alternative economic scenarios: an inflationary bubble, higher-than-expected growth and depression.

The first alternative scenario is for moderate growth of 2 per cent per annum and high inflation, which would see “nominal positive returns over the 10-year period (but) real returns eaten up by inflation".

A second alternative scenario is for sharp growth of 7 per cent and moderate inflation, pushing the S&P 500 to 1,800 points at the end of the 10-year period.

A final alternative scenario would be for depression, in which growth would fall at 10 per cent per annum, leaving the S&P 500 at 300 points.