10 Year Return on the S&P 500 Since 1955

Below we highlight the simple rolling ten year return on the S&P 500 since 1955 (note that this is simple return, not total return). The shaded areas on the chart are periods of negative return. The great bull market lasting from 1982 to 2000 brought this calculation has high as 400% before turning negative in October of 2008. With this market up 59% from the bottom, many investors may feel as though they missed these gains and need to wait for another entry point. Depending on your time horizon, that is not necessarily the case.

If we look at the last period when ten year returns were negative, we find that the ten year return going forward is an average of 163%. In other words, on a days when the ten year return on the S&P was negative (this is roughly 640 trading days) the average return going forward ten years was 163% and the minimum return was 78%. Anyone with a time horizon of at least ten years should stay in stocks.

click to enlarge

Comments

[logicalthought:]

>>Anyone with a time horizon of at least ten years should stay in stocks.<<

And in the long run, we're all dead. If you want to talk about "10 years", the relevant question is what's the return on stocks if one buys the S&P after a 50% rally straight up (i.e., "today"), vs. instead buying, say, Baa bonds at that point. I don't know the answer, but I think that's the relevant question.

Oct 13 09:51 AM

[Dean M:]

That is of course a relevant question but in this case we went from discounting the great depression to discounting a severe recession which was probably appropriate given the way things played out. We're still going to come out of the recession if you have a 10 year outlook.


On Oct 13 09:51 AM logicalthought wrote:

> >>Anyone with a time horizon of at least ten years should stay in
> stocks.<<
>
> And in the long run, we're all dead. If you want to talk about "10
> years", the relevant question is what's the return on stocks if one
> buys the S&amp;P after a 50% rally straight up (i.e., "today"), vs.
> instead buying, say, Baa bonds at that point. I don't know the answer,
> but I think that's the relevant question.

Oct 13 10:28 AM

[Graham and ...:]

The chart excludes data from the 1930s, the most nearly comparable period in the past century. Those numbers would almost certainly tell a different story.

And the "flat" performance of the 1970s is not adjusted for inflation, which would have made it hugely negative in real terms.

Your chart shows that the highs are quite high, but omits the fact that the lows are very low.

Oct 13 06:55 PM