Returns By Decade

Dec. 27, 2019 12:36 PM ETSPDR S&P 500 Trust ETF (SPY)77 Comments
Ploutos profile picture
Ploutos
21.15K Followers

Summary

  • This analysis looks at 14 decades of total returns for U.S. stocks, and breaks the returns down into its component parts - dividends, earnings growth, and multiple changes.
  • The 2010s saw above trend growth driven by historically strong earnings growth.
  • The article also seeks to answer how we are set up for returns as the calendar flips to a new decade by estimating component returns for the 2020s.

The article was also shared with PRO+ Tech subscribers - find out more about PRO+ here.

We are just a couple of trading days from closing down a very successful decade for U.S. equity markets. This article takes a look at how returns for the S&P 500 (NYSEARCA:SPY) and its predecessor indices compared in the 2010s versus previous decades. This analysis was conducted to see if there are any themes that could be gleaned that could have predictive value for the next decade.

Below I have tabled the total returns for the past 14 decades. The total returns are broken down into component parts - dividend, earnings growth, earnings multiple change, summing to total return. For the 1930s to 2010s, total return came from Bloomberg. I also subtracted total return from price return from the Bloomberg data to calculate the return from dividends. Earnings growth came from the long Shiller dataset, and is simply end of period earnings divided by beginning of period earnings and compiled into an annual form. Multiple change is the plug that equals the total return. For the periods from 1880s to 1920, I used Shiller's dividend data and calculated a total return directly.

Returns by DecadeSource: Robert Shiller, Bloomberg, S&P

Below are my takeaways from decade-long returns covering the modern history of the U.S. stock market.

Negative returns for a decade are still rare. We have seen two decades with negative returns - the Depression-era 1930s and the early 2000s - which sandwiched the deflation of the tech bubble and the Financial Crisis decade into one ten-year period.

While the 2010s saw strong returns, they are certainly not unprecedented. The 1920s, 1950s, 1980s, and 1990s all featured higher total returns.

While current equity multiples are above their long-run trend, the solid returns of the 2010s were largely driven

This article was written by

Ploutos profile picture
21.15K Followers
Institutional investment manager authoring on a variety of topics that pique my interest, and could further discourse in this online community. I hold an MBA from the University of Chicago, and have earned the CFA designation. My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.

Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure:
Disclaimer: My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties, and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.

Recommended For You

Comments (77)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.