"What assets should we invest in for the next five years and what returns should we expect?" was the straightforward question posed by the moderator during an entertaining panel discussion at an event I participated in this month.

Some of the answers given were anything but straightforward reflecting that the investment outlook today is perhaps the most challenging in living memory. For the last four decades, five-year investment returns have been relatively consistent from period-to-period. With the unprecedented levels of real return available from most asset classes during this time, it has served to make asset allocation far easier than it might be in the years ahead.

History has taught that a particular asset class exhibits reasonably consistent return expectations over time:

The best data I'm aware of are the valuations compiled by the Amsterdam authorities for Dutch property tax purposes, dating back to 1628. The message is clear; although values may depart from the trend by quite a significant variance for sustained periods, ultimately property - while also producing rental income - has increased in price over the very long term roughly in line with the rate of inflation.

Everyone knows that equities produce better long-term real returns than other asset classes such as property. Maybe everyone's wrong? If we adjust today's DJIA (Dow Jones Global Indexes: .DJI) for inflation, that would be equivalent to a level just below 2,000 points when the index was created. Despite the recent volatility the Dow now sits above an impressive nine times that level. In other words, stocks would have to fall by almost 90 percent to mean revert (as they did the last time that they were as overvalued as this in the late 1920s).

The interest rates on government debt also tracked inflation extremely tightly for a significant period until the early to mid-1980s when rates negatively diverged (i.e. became much lower than inflation). This of course resulted in the prices of bonds increasing correspondingly.

Some believe that a structural adjustment took place during the 1970s and 1980s that justifies the divergence from centuries of data. Personally I don't – which means that we should expect to see property fall in value by up to 70 percent while equities fall in value by up to 90 percent.

But even if the structural adjustment argument is right and the clock had been re-set at the start of 2001, then over the next 15 years this would imply:

1) Property to do little better than remain flat in nominal terms and lose over 20 percent of its inflation-adjusted value.