Sunday, December 20, 2009

Worst Stock Return Decade Ever?

From the WSJ:
With two weeks to go in 2009, the declines since the end of 1999 make the last 10 years the worst calendar decade for stocks going back to the 1820s, when reliable stock market records begin, according to data compiled by Yale University finance professor William Goetzmann. He estimates it would take a 3.6% rise between now and year end for the decade to come in better than the 0.2% decline suffered by stocks during the Depression years of the 1930s.

Since the end of 1999, the Standard & Poor's 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University. His data use dividend estimates for 2009 and the consumer price index for the 12 months through November.

Just shows how fickle conventional wisdom is. The 1990's had its best return decade ever, averaging 17.6% returns, and the equity return premium was often estimated around 6%. Now, it's generally thought to be around 2-3%.


Anonymous said...

Buy-and-hold became the industry mantra at exactly the wrong time-- the 1990s. It goes to show you that the talking heads in the investment industry are, well, talking heads.

Michael Meyers said...

I didn't like the WSJ article because of the underlying assumption that the US market is THE market. In today's world that is far far from the truth. Anyone that was invested globally during the past decade, as they should have been, has done OK.


J said...

Buy and hold did work wonderfully in Israel.