S&P 500 continues to provide higher real returns than ASX200 over the past two decades.
New research comparing Australian stock market returns to those in the United States shows the US has outperformed across 1, 5, 10, and 20 year windows.
The new research looking at the two major financial hubs for stock trading showed that over a 20 year period from April 2005 to April 2025, the S&P 500 delivered a 7.53% return after inflation. While over in Australia, the ASX200 provided a return of 5.13%, which is closer to term deposit returns than US markets for the same period.
The pattern is similar over shorter timeframes, with S&P 500 returns being 9.49% after inflation, compared to ASX200’s real return of 4.57%. Over a five year period S&P 500 saw real returns of 12.70%, while Australia lagged behind at 8.65%, a considerable x% difference.
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In terms of wealth accumulation, the material impact is very significant. A $10,000 investment would’ve grown to approximately $71,000 in US markets, while in Australia it would be just $45,000 assuming all dividends were reinvested.
Australia’s stock market has long relied on dividends to deliver returns that can compete with other major financial hubs. Over the last 20 years, more than half of the ASX200’s total performance has come down to dividend reinvestment. Without this, returns sit at just 3.89% per year, a figure much closer to term deposit returns.
In contrast, the USA has generated most of its growth from capital gains, with reinvested dividends playing a far smaller role than in Australia. This comes down to the structure of the S%P500 being more heavily weighted towards sectors that reinvest heavily into growth such as tech and healthcare, whereas Australia’s ASX200 is largely concentrated in resources and financial companies.
Evidently, both markets faced major downturns during the global financial crisis (GFC) and the COVID pandemic period, but the speed and scale of the recovery in the USA helped drive stronger compounding. The US market’s resilience has reinforced the material gap across every timeframe measured.
The research and analysis shows that while Australian shares are still a key income source, the US market consistently offers stronger real growth for long term investors, resulting in a substantial gap in wealth outcomes.