Reviewing the S&P 500 Returns Can Provide A lot of Lessons

by Evan

The other day I was talking to a colleague and he asked if I ever really ever took a look at the S&P Returns over the long term, and shockingly I realized I had not.  As soon as I took a look a few things jumped out at me, and I immediately thought of a few “take aways.”

S&P Historical Returns

I took the data from NYU Stern:

Year S&P 500 Year S&P 500 Year S&P 500
1928 43.81% 1966 -9.97% 2004 10.74%
1929 -8.30% 1967 23.80% 2005 4.83%
1930 -25.12% 1968 10.81% 2006 15.61%
1931 -43.84% 1969 -8.24% 2007 5.48%
1932 -8.64% 1970 3.56% 2008 -36.55%
1933 49.98% 1971 14.22% 2009 25.94%
1934 -1.19% 1972 18.76% 2010 14.82%
1935 46.74% 1973 -14.31% 2011 2.10%
1936 31.94% 1974 -25.90% 2012 15.89%
1937 -35.34% 1975 37.00% 2013 32.15%
1938 29.28% 1976 23.83% 2014 13.48%
1939 -1.10% 1977 -6.98%
1940 -10.67% 1978 6.51%
1941 -12.77% 1979 18.52%
1942 19.17% 1980 31.74%
1943 25.06% 1981 -4.70%
1944 19.03% 1982 20.42%
1945 35.82% 1983 22.34%
1946 -8.43% 1984 6.15%
1947 5.20% 1985 31.24%
1948 5.70% 1986 18.49%
1949 18.30% 1987 5.81%
1950 30.81% 1988 16.54%
1951 23.68% 1989 31.48%
1952 18.15% 1990 -3.06%
1953 -1.21% 1991 30.23%
1954 52.56% 1992 7.49%
1955 32.60% 1993 9.97%
1956 7.44% 1994 1.33%
1957 -10.46% 1995 37.20%
1958 43.72% 1996 22.68%
1959 12.06% 1997 33.10%
1960 0.34% 1998 28.34%
1961 26.64% 1999 20.89%
1962 -8.81% 2000 -9.03%
1963 22.61% 2001 -11.85%
1964 16.42% 2002 -21.97%
1965 12.40% 2003 28.36%

 

What I immediately noticed:

  • In 86 years of history how many times did the S&P 500 have 2 consecutive down years? 8 (3 of which were during the great depression era)
  • In 86 years of history how many times did the S&P have 3 consecutive down years? 4 (2 of which were during the great depression era)
  • In 86 years of history how many times did the S&P have 4 consecutive down years? 1 during the great depression
  • After every multi-year contraction was followed by a double digit gain in the first following positive year

Easy Lessons from Looking at the Broad Market’s History

  1. This time is not different – regardless of what the main stream media is saying, repeat it with me, THIS TIME IS NOT DIFFERENT
  2. There will be light at the end of the tunnel – I don’t care how bad it may seem, if you are young enough there will be a positive year around the corner
  3. Asset allocation is especially important if you are older – even the 10% chance you may have 2 consecutive years may want you to limit your equity exposure if you are older
  4. Make sure you have an adequate CASH –  reserve selling during one of those down years is going to hurt over the long term

 

Do you see any other easy lessons?

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