Historical returns for Total Bond Market, Inflation and S&P 500 Index

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Taylor Larimore
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Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Taylor Larimore » Mon Jul 23, 2018 8:28 pm

Bogleheads:

This is an update of my earlier post showing the historical returns (1976-2017) of the U.S. Aggregate Bond Index (benchmark for Vanguard's Total Bond Market Index Fund) and Inflation (CPI-U). I have now added the S&P 500 Index returns

YEAR--INFLATION--BOND INDEX--S&P 500
1976-------4.9%--------15.6%--------23.8%
1977-------6.7-----------3.0---------(-7.0)
1978-------9.0-----------1.4-----------6.5
1979------13.3-----------1.9---------18.5
1980------12.5-----------2.7---------31.7
1981-------8.9-----------6.3---------(-4.7)
1982-------3.8----------32.6---------20.4
1983-------3.8-----------8.4---------22.3
1984-------3.9----------15.2----------6.1
1985-------3.8----------22.1---------31.2
1986-------1.1----------15.2---------18.5
1987-------4.4-----------2.8-----------5.8
1988-------4.4-----------7.9----------16.5
1989-------4.6----------14.5----------31.5
1990-------6.1-----------8.9----------(-3.1)
1991-------3.1----------16.0----------30.2
1992-------2.9-----------7.4------------7.5
1993-------2.7-----------9.7-----------10.0
1994-------2.7---------(-2.9)-----------1.3
1995-------2.5----------18.5----------37.2
1996-------3.3-----------3.6----------22.7
1997-------1.7-----------9.7----------33.1
1998-------1.6-----------8.7----------28.3
1999-------2.7---------(-0.8)---------20.9
2000-------3.4----------11.6---------(-9.0)
2001-------1.6-----------8.4--------(-11.5)
2002-------2.4----------10.3--------(-22.0)
2003-------1.9-----------4.1----------28.4
2004-------3.3-----------4.3----------10.7
2005-------3.4-----------2.4-----------4.8
2006-------2.5-----------4.3----------15.6
2007-------4.1-----------7.0-----------5.5
2008-------0.1-----------5.2--------(-36.6)
2009-------2.7-----------5.9----------25.9
2010-------1.5-----------6.5----------14.8
2011-------3.0-----------7.7-----------2.1
2012-------1.7-----------4.3----------16.0
2013-------1.5---------(-2.0)---------32.2
2014-------1.6-----------6.0----------13.5
2015-------0.7-----------0.5-----------1.4
2016-------2.1-----------2.6----------12.3
2017-------2.1-----------3.5----------21.8

Source: U.S. Department of Labor, Barclays, DowJones Indices and Seeking Alpha

Observations:

* Inflation increased from 4.9% in 1976 to 13.3% in 1979; nevertheless the Bond Index had positive returns during that entire period of high inflation.

* The Aggregate Bond Index had only three negative years (all small) reflecting very low risk.

* Stocks are much riskier than bonds.

* It is very important to Stay the Course.

* Past performance does not forecast future performance.

Best wishes.
Taylor
Last edited by Taylor Larimore on Wed Jul 25, 2018 1:43 pm, edited 2 times in total.
"Simplicity is the master key to financial success." -- Jack Bogle

teacherguy
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by teacherguy » Mon Jul 23, 2018 9:15 pm

Thank you. I will rest easier tonight after just getting my purchase confirmation of 100k worth of FIDELITY U.S. BOND INDEX PREMIUM CLASS (FSITX). :wink:

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Svensk Anga
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Svensk Anga » Mon Jul 23, 2018 9:24 pm

True, the index had positive nominal returns through the late 1970's. Real returns were dismal:

1977 -3.7%
1978 -7.6%
1979 -11.4%
1980 -9.8%
1981 -2.6%

Purchasing power evaporated year after year. But what a recovery from 1982 onward!

I suspect that a retiree drawing on the portfolio would have been better off with TIPS, had they been available then. Maybe an accumulator could ride it out in nominal bonds, buying up high-coupon issues along the way, but it would be nerve wracking waiting for the cycle to turn the other way.

MIretired
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by MIretired » Mon Jul 23, 2018 9:47 pm

If you're not counting on getting the best non-correlation to equities, Tot.Bnd. has a better return and Sharpe ratio (stand alones) than Intermed.Treas.; better Sharpe than Intermed.Corp.

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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Northern Flicker » Tue Jul 24, 2018 1:39 am

* Inflation increased from 4.9% in 1976 to 13.3% in 1979; nevertheless the Bond Index had positive returns during that entire period of hyperinflation.
Fortunately this was not actual hyperinflation, which is normally defined as an annual inflation rate of at least 50%. Any nominal bond fund holding will have very dramatic losses in real terms, even going to zero in some cases, in actual hyperinflation,

Some more US inflation rates:

1968 : 4.7%
1969 : 6.2%
1970 : 5.6%
1971 : 3.3%
1972 : 3.4%
1973 : 8 7%
1974 : 12.3%
1975 : 6.9%
Index fund investor since 1987.

Valuethinker
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Valuethinker » Tue Jul 24, 2018 3:40 am

Taylor Larimore wrote:
Mon Jul 23, 2018 8:28 pm


* Inflation increased from 4.9% in 1976 to 13.3% in 1979; nevertheless the Bond Index had positive returns during that entire period of hyperinflation.
Hyperinflation is generally taken as more than 100% p.a. inflation [EDIT: jalbert says it is 50%, I may be misremembering] -- I believe that is the common usage of the term in economics. The US experienced high inflation in the 1970s but not unprecedented in US history (the US Revolution, Civil War, post WW1 and post WW2 periods all had inflation that high).

The US was not the Weimar Republic in 1924, where people were burning paper money as a source of heat, it was worth so little (1 million per cent. + inflation). Nor Israel nor Turkey (both c. 100%+ inflation at times in the 70s-80s%).
* The Aggregate Bond Index had only two negative years (both small) reflecting very low risk.

* Stocks are much riskier than bonds.

* It is very important to Stay the Course.

Past performance does not forecast future performance.

Best wishes.
Taylor
All good advice.

In particular, because the human mind seeks patterns where there are not patterns in data, we tend to believe equity returns are bounded and relatively stable. In fact, the pattern of equity returns looks fractal - extreme returns are much more likely than a Gaussian distribution would predict. Equities are truly volatile, which is a justification for their high long run returns. And we can't predict future equity returns by looking at past ones -- they just are not that stable over any given sub period.

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Bruce
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Bruce » Wed Jul 25, 2018 1:51 am

Taylor

Unless I am reading the chart incorrectly, It appears from the data chart the bond index actually had three negative years instead of two. Bond index returns are listed in the chart with a parenthesis for a negative result for 1994,1999, and 2013.

Agree all the negatives are rather small.

And staying the course continues to be the best advice!

Thanks for yet another helpful post!

Best Regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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Taylor Larimore
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Taylor Larimore » Wed Jul 25, 2018 8:38 am

Bruce:

Thank you for the correction. I edited my post.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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DartThrower
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by DartThrower » Wed Jul 25, 2018 8:53 am

The S&P was up in 2012 by about 16% but the chart is showing it as negative?
A Boglehead can stay the course longer than the market can stay irrational.

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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by XCskiguy » Wed Jul 25, 2018 8:59 am

Great reminder for a younger-but-approaching-middle-age investor like myself to stay the course!!

Random Poster
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Random Poster » Wed Jul 25, 2018 10:48 am

Where would one find the historical yearly or monthly yield for the Total Bond Market Index Fund?

Vanguard offers the historical monthly yield data for about the last 18 months, but is there a source that shows the monthly yield since the Fund's inception?

MIretired
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by MIretired » Wed Jul 25, 2018 5:17 pm

Random Poster wrote:
Wed Jul 25, 2018 10:48 am
Where would one find the historical yearly or monthly yield for the Total Bond Market Index Fund?

Vanguard offers the historical monthly yield data for about the last 18 months, but is there a source that shows the monthly yield since the Fund's inception?
If you use portfoliovisualizer:
For annual TTM yield -- set show income yes, set reinvest income no. Income graph will show dollar income each year, but you have to determine dollars of investment each year. Also, there is a monthly returns chart(instead of the graph of returns) that may show monthly incomes.
I think.

Random Poster
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Re: Historical returns for Total Bond Market, Inflation and S&P 500 Index

Post by Random Poster » Thu Jul 26, 2018 8:07 am

MIretired wrote:
Wed Jul 25, 2018 5:17 pm
If you use portfoliovisualizer:
For annual TTM yield -- set show income yes, set reinvest income no. Income graph will show dollar income each year, but you have to determine dollars of investment each year. Also, there is a monthly returns chart(instead of the graph of returns) that may show monthly incomes.
I think.
Thank you.

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