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Fed Birth Pared Returns as New Century Looms: Cutting Research

The creation of the Federal Reserve 100 years ago helped develop a new world of investing in which bond returns fell, and the start of its next century may also mark a new era in monetary policy making, says Deutsche Bank AG.

Returns on 10-year Treasury notes adjusted for inflation were about an annualized 4.5 percent in the 100 years before the Fed and less than 2 percent in the 100 years after the Fed was born on Dec. 23, 1913, according to the study, released Sept. 12 by strategists including London-based Jim Reid. The return on equities as measured by the Standard & Poor’s 500 Index was largely the same over the two periods, at about 7 percent.