Yield, Britannia

The British Empire hit peak size in 1919, gaining Axis territories through the Treaty of Versailles.

Over the coming decades it ceded cultural, military, and economic power to the United States.

How did this play out for Britain's investors?

The clever people at Finaeon constructed a UK stock index that goes all the way back to 1692.

Let's look at two of their highlighted periods:

• The Great Reversal (1914 - 1974), characterised by heavy government intervention in the economy and,
• Globalisation (1974-2018), starting with neoliberalism and ending with Brexit.

Adjusted for inflation, shareholders in the Great Reversal saw negative annual gains (-0.74), but this was offset by dividends to provide real returns of 3.78% p.a.. 

During Globalisation, investors enjoyed 3.56% p.a. inflation-adjusted gains and 7.56% real total annual returns.

So ... not disastrous! People still made money through the Empire's decline, even if it meant reinvesting dividends just to maintain value.

But how did it compare to investing in new top dog, America?

Real Total Returns	U.K.	U.S.A.
Great Reversal	3.78%	5.81%
Globalisation	7.56%	6.64%

I assumed that the U.S. during Globalisation would have powered ahead, with it manifesting Space Shuttles, lasers, and the Internet. I guess it did also host the dot-com bust and GFC.

The U.K. - U.S.A. rivalry is an example of the Thucydides Trap gone right. A hegemon losing ground to an arriviste need not lead to a hot war.

As we ruminate about whether the U.S. has hit its apex, perhaps we can remind ourselves that decline is not total. One can go gently into that good night with a rocking stock portfolio.

There is plenty of spoils for both vanquisher and vanquished.