As recounted many times in these pages, a headache for any wealth manager is how to grow, or at least preserve, clients’ money in a world of negative real interest rates and very low bond yields. And to help frame how tough this challenge is, those clever people at Barclays Capital have crunched a pile of numbers for that firm’s annual Equity Gilt Study.

Among the important conclusions of the study is that while equity risk premia are at or near historic highs – such as 6.26 per cent for the UK stock market, 5.48 per cent in the US equity market and 6.36 per cent in the case of Germany – this is not because something unusual is happening to stocks, the bank argues. (The equity risk premium is the excess return equities deliver over “risk-free” assets such as government bonds.) Rather, demand for risk-free assets is outstripping supply, and that is even the case as government debt balloons in a number of countries, such as the US.

In fact, Barclays Capital argues that equity valuations are currently not out of sync with historic performance, although they are different from the bubble years of the 1990s. What is really different is that the supply of “safe” assets, as a share of world gross domestic product, has fallen 5 per cent from 2002 through to 2007, the study says. Even though debt supply has subsequently increased and countries such as the US have lost their AAA credit ratings, demand for such safe assets is still strong.

The relative lack in supply of safe assets may be alleviated in the next few years, Barclays Capital argues, but the gap between such assets and demand, which amounted to around 35 per cent of GDP in 2002, will probably still exist, at around 12 per cent in 2016. Even if the US Federal Reserve, which has been a big buyer of debt as part of its quantitative easing, starts to sell its debt holdings, the dearth of supply will not be greatly eased, the study says.

On the positive side, Barclays Capital said that there should not be a big impact on equities if there is a reversal of the “current extraordinarily low real bond yields”. More negatively, the study argues that there may be less “fear” priced into equities than some investors may expect, which means that economic bad news could be bad news for the stock market.

The bank also points out that the excess returns on equities achieved in the US and UK markets between 1950 and 2011 are below longer-term performance between 1900 and 2010. For example, in the US, excess returns since 1950 were 4.65 per cent, while its 110-year average is 4.54 per cent.

All in all, this study suggests that it is not the equity market that has been behaving a little strangely. Rather, and perhaps hard to believe in a world of constant fretting over big government deficits, it is the bond market that has been bent out of shape by a supply/demand mismatch. How much longer that situation can persist is, as always, the hardest question to answer.