US Stock Market Returns in the 21st Century

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bobcat2
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US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 11:37 am

The first 19 years of the 21st century are now history. Here are the real average annual returns for the US stock market over those 19 years. A period which includes a nine year bull market as well as two market crashes.

US stock market annual average real returns from 12/31/99 through 12/31/2018.

Code: Select all

Annual average real return with dividends reinvested       3.0%
Annual average real return without dividends reinvested    1.1%  
Link to calculation tool for stock market returns - https://dqydj.com/wilshire-5000-return-calculator/

BobK

PS - The inflation data for December 2018 is not in yet and was extrapolated from the November CPI data by the above tool. I would expect the one month CPI extrapolation error to be very small and have a negligible impact on the 19 year average real returns.
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.

GAAP
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Re: US Stock Market Returns in the 21st Century

Post by GAAP » Fri Jan 04, 2019 11:51 am

For the Shiller PE (CAPE10) naysayers, the 1/1/2000 value was 43.77 (http://www.multpl.com/shiller-pe/table), 1/CAPE10 would have estimated a 2.28% real return for the S&P 500. The S&P actually yielded a 2.94% real return for that period according to Portfolio Visualizer.

Yes, I know those are two different indices, but they are similar. That slight underestimate is sufficient for my purposes -- and I would much rather guess low than high.
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Elysium
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Re: US Stock Market Returns in the 21st Century

Post by Elysium » Fri Jan 04, 2019 11:52 am

Thanks for posting this. It would be nice to see real returns for Internatinal Markets and Bonds alongside this information to give a full picture.

Nominal returns from portfolio visualizer for the three total market funds show that US Equities still provided better returns compared to other two options even in this period of anemic returns.

See link https://www.portfoliovisualizer.com/bac ... ion3_3=100

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Re: US Stock Market Returns in the 21st Century

Post by columbia » Fri Jan 04, 2019 12:06 pm

GAAP wrote:
Fri Jan 04, 2019 11:51 am
For the Shiller PE (CAPE10) naysayers, the 1/1/2000 value was 43.77 (http://www.multpl.com/shiller-pe/table), 1/CAPE10 would have estimated a 2.28% real return for the S&P 500. The S&P actually yielded a 2.94% real return for that period according to Portfolio Visualizer.

Yes, I know those are two different indices, but they are similar. That slight underestimate is sufficient for my purposes -- and I would much rather guess low than high.
VERY interesting companion data. Thanks for pointing that out.

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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 12:06 pm

Here's the 'real' inflation adjusted annualized total returns from each year (assuming bought at the start of the year and sold at the start of 2019)

2000 3.009%
2001 4.208%
2002 5.010%
2003 6.876%
2004 5.766%
2005 5.586%
2006 5.631%
2007 5.155%
2008 5.637%
2009 10.796%
2010 9.489%
2011 8.847%
2012 10.427%
2013 9.615%
2014 6.502%
2015 4.758%
2016 7.192%
2017 4.283%
2018 -8.259%

(Average 5.82%)
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 12:12 pm

Elysium wrote:
Fri Jan 04, 2019 11:52 am
Thanks for posting this. It would be nice to see real returns for Internatinal Markets and Bonds alongside this information to give a full picture.
From the Triumph of the Optimists researchers we do have the data from last year's update report for the US, which covers the 18 years from 12/1999 through 12/2017. They show that the real annual average return on US long-term government bonds was 5.0% over that period, handily besting US stocks. Real returns on international stocks over the period (denominated in US$) under performed US stocks by about half a percent per year.

Link to last year's report with data thru 2017.
https://www.credit-suisse.com/media/ass ... y-2018.pdf

Alternative link - https://www.google.com/search?q=Credit+ ... 4&dpr=1.18

BobK
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Re: US Stock Market Returns in the 21st Century

Post by PaulF » Fri Jan 04, 2019 12:31 pm

Why do you think that the year 2000 belongs to the 21st century?

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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 12:37 pm

PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
OK. So returns on US stock market for the 19 years since the nineteen hundreds. :D

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.

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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 12:42 pm

bobcat2 wrote:
Fri Jan 04, 2019 11:37 am
The first 19 years of the 21st century are now history. Here are the real average annual returns for the US stock market over those 19 years. A period which includes a nine year bull market as well as two market crashes.

US stock market annual average real returns from 12/31/99 through 12/31/2018.

Code: Select all

Annual average real return with dividends reinvested       3.0%
Annual average real return without dividends reinvested    1.1%  
Link to calculation tool for stock market returns - https://dqydj.com/wilshire-5000-return-calculator/

BobK

PS - The inflation data for December 2018 is not in yet and was extrapolated from the November CPI data by the above tool. I would expect the one month CPI extrapolation error to be very small and have a negligible impact on the 19 year average real returns.
That isn't looking so good. The IPS I just wrote says a 15% maximum of net worth into stocks and bonds. Your data makes me fell good about my decision :sharebeer

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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 12:46 pm

PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
I would say it definitely does. Remember when people were celebrating the new century and new millennium? Although I was young, I recall that celebration took place on 12:01 AM 1/1/2000, NOT 12:01 AM 1/1/2001.

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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 12:50 pm

fire4fun wrote:
Fri Jan 04, 2019 12:46 pm
PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
I would say it definitely does. Remember when people were celebrating the new century and new millennium? Although I was young, I recall that celebration took place on 12:01 AM 1/1/2000, NOT 12:01 AM 1/1/2001.
When Did the 21st Century Start?
https://www.timeanddate.com/counters/mil2000.html
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: US Stock Market Returns in the 21st Century

Post by POLO » Fri Jan 04, 2019 12:58 pm

I'm sure this conversation has be had countless times, but how many of you dumped your millions into the US equities market exactly on the last trading day of 1999? Exactly during the time the market was at its peak? This is why even the "90's Japan" argument doesn't make sense to me. The market was lower in the years before and after and continue to trend updwards, meaning someone did a hell of a lot better than 3.0%.

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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 1:01 pm

On highly volatile investments calculating returns jan1-dec31 vs. , for instance, jul1-jun30 may yield rather different results.

Also, how accurate would have been the return estimate using the traditional ttm P/E versus Shiller’s index ?

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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 1:18 pm

JoMoney wrote:
Fri Jan 04, 2019 12:50 pm
fire4fun wrote:
Fri Jan 04, 2019 12:46 pm
PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
I would say it definitely does. Remember when people were celebrating the new century and new millennium? Although I was young, I recall that celebration took place on 12:01 AM 1/1/2000, NOT 12:01 AM 1/1/2001.
When Did the 21st Century Start?
https://www.timeanddate.com/counters/mil2000.html
Assuming time zero, which is year zero, the 21st century would have started in 2000. Of course the B.C.E. / A.D. "Year 0" start point is arbitrary but the point still stands.

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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 1:18 pm

POLO wrote:
Fri Jan 04, 2019 12:58 pm
I'm sure this conversation has be had countless times, but how many of you dumped your millions into the US equities market exactly on the last trading day of 1999? Exactly during the time the market was at its peak? This is why even the "90's Japan" argument doesn't make sense to me. The market was lower in the years before and after and continue to trend updwards, meaning someone did a hell of a lot better than 3.0%.
And someone did worse.

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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 1:27 pm

fire4fun wrote:
Fri Jan 04, 2019 1:18 pm
JoMoney wrote:
Fri Jan 04, 2019 12:50 pm
fire4fun wrote:
Fri Jan 04, 2019 12:46 pm
PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
I would say it definitely does. Remember when people were celebrating the new century and new millennium? Although I was young, I recall that celebration took place on 12:01 AM 1/1/2000, NOT 12:01 AM 1/1/2001.
When Did the 21st Century Start?
https://www.timeanddate.com/counters/mil2000.html
Assuming time zero, which is year zero, the 21st century would have started in 2000. Of course the B.C.E. / A.D. "Year 0" start point is arbitrary but the point still stands.
It's not arbitrary that there was no "Year 0" B.C. or A.D., or that a century = a period of 100 years, therefore the "21st century" started in year 2001.
If the point is the popular celebration was at the turn from 1999 to 2000, fine, but even then there was a small niche of nerds making the distinction that it wasn't the "real" start of the 21st century.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 1:27 pm

It is a rather useless definition of “return in a century” that which changes substantially whether one starts calculating one year earlier, or one year later...

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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 1:32 pm

POLO wrote:
Fri Jan 04, 2019 12:58 pm
I'm sure this conversation has be had countless times, but how many of you dumped your millions into the US equities market exactly on the last trading day of 1999? Exactly during the time the market was at its peak? This is why even the "90's Japan" argument doesn't make sense to me. The market was lower in the years before and after and continue to trend updwards, meaning someone did a hell of a lot better than 3.0%.
Someone who did "a hell of a lot better than 3.0%" over the last 19 years was the long-term US Treasury bond investor who did about 1.6% per year better.

BobK
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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 1:45 pm

Series I Savings Bonds were offering 3.60% + Inflation in May of 2000
An index portfolio of 20-30 year Treasury Strips earned 8.75% nominal or 6.48% 'real' if bought in 2000

People were really optimistic about the economic future back then ;)
There was even a government study that was concerned the U.S. might pay off the national debt
https://www.npr.org/sections/money/2011 ... ent-report
https://media.npr.org/assets/img/2011/1 ... erDebt.pdf
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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 1:46 pm

Thesaints wrote:
Fri Jan 04, 2019 1:27 pm
It is a rather useless definition of “return in a century” that which changes substantially whether one starts calculating one year earlier, or one year later...
So let's calculate one year earlier and get a 20 year return through the end of last year. The year 1999 was a great year for US stocks. The real return with dividends reinvested in 1999 was 19.7%. The 20 year real return on US stocks with dividends reinvested ending in 12/31/2018 was 3.8%. Still a far cry from stellar stock market returns and well below the return on LT Treasuries over that 20 year period.

BobK
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Re: US Stock Market Returns in the 21st Century

Post by greg24 » Fri Jan 04, 2019 1:49 pm

JoMoney wrote:
Fri Jan 04, 2019 12:50 pm
fire4fun wrote:
Fri Jan 04, 2019 12:46 pm
PaulF wrote:
Fri Jan 04, 2019 12:31 pm
Why do you think that the year 2000 belongs to the 21st century?
I would say it definitely does. Remember when people were celebrating the new century and new millennium? Although I was young, I recall that celebration took place on 12:01 AM 1/1/2000, NOT 12:01 AM 1/1/2001.
When Did the 21st Century Start?
https://www.timeanddate.com/counters/mil2000.html
There is a whole lot of incorrect information posted on the internet.

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Re: US Stock Market Returns in the 21st Century

Post by selters » Fri Jan 04, 2019 1:50 pm

Edit: I don't want to go into an argument over when the third millennium started. The explanation given above on timeanddate.com makes sense.
Last edited by selters on Fri Jan 04, 2019 1:56 pm, edited 2 times in total.

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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 1:54 pm

bobcat2 wrote:
Fri Jan 04, 2019 1:46 pm
Thesaints wrote:
Fri Jan 04, 2019 1:27 pm
It is a rather useless definition of “return in a century” that which changes substantially whether one starts calculating one year earlier, or one year later...
So let's calculate one year earlier and get a 20 year return through the end of last year. The year 1999 was a great year for US stocks. The real return with dividends reinvested in 1999 was 19.7%. The 20 year real return on US stocks with dividends reinvested ending in 12/31/2018 was 3.8%. Still a far cry from stellar stock market returns and well below the return on LT Treasuries over that 20 year period.

BobK
So, starting one year earlier or later does not matter, as it should (that was my comment).
As for the LT Treasuries better return, I bet you can find several other investments that outperformed a yearly 3.8%.
I’m still unsure as what the message is...

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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 1:55 pm

greg24 wrote:
Fri Jan 04, 2019 1:49 pm
JoMoney wrote:
Fri Jan 04, 2019 12:50 pm
...
When Did the 21st Century Start?
https://www.timeanddate.com/counters/mil2000.html
There is a whole lot of incorrect information posted on the internet.
My cat's breath smells like cat food.

It's a factual statement, but refutes nothing and adds nothing to the conversation.
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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 2:05 pm

Thesaints wrote:
Fri Jan 04, 2019 1:54 pm
As for the LT Treasuries better return, I bet you can find several other investments that outperformed a yearly 3.8%
Well neither US stocks nor international stocks outperformed 3.8% over the last 20 years.


I’m still unsure as what the message is...
Stock investing has not produced very good returns over the last 20 years. This despite the fact that we had a very strong nine year bull market in US stocks from early 2009 through early 2018.

BobK
Last edited by bobcat2 on Fri Jan 04, 2019 2:06 pm, edited 1 time in total.
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Re: US Stock Market Returns in the 21st Century

Post by Wakefield1 » Fri Jan 04, 2019 2:05 pm

bobcat2 wrote:
Fri Jan 04, 2019 1:46 pm
Thesaints wrote:
Fri Jan 04, 2019 1:27 pm
It is a rather useless definition of “return in a century” that which changes substantially whether one starts calculating one year earlier, or one year later...
So let's calculate one year earlier and get a 20 year return through the end of last year. The year 1999 was a great year for US stocks. The real return with dividends reinvested in 1999 was 19.7%. The 20 year real return on US stocks with dividends reinvested ending in 12/31/2018 was 3.8%. Still a far cry from stellar stock market returns and well below the return on LT Treasuries over that 20 year period.

BobK
So a lot less than the press hoopla would have me believe but-didn't Mr. Bogle warn us that this (subdued returns) was likely?

I like my dividends

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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 2:07 pm

It will be interesting to compare the 19 year stock/bonds returns from 2009 to 2028.

The 19 years ending in 12/31/1999 had a 12.287% annualized "real' total return.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 2:15 pm

bobcat2 wrote:
Fri Jan 04, 2019 2:05 pm
Thesaints wrote:
Fri Jan 04, 2019 1:54 pm
As for the LT Treasuries better return, I bet you can find several other investments that outperformed a yearly 3.8%
Well neither US stocks nor international stocks outperformed 3.8% over the last 20 years.
What about high-yeld, or Chinese stocks? I mean, you picket LT treasuries. What’s the meaning of your choice, other than you chose ex-post ?

I’m still unsure as what the message is...
Stock investing has not produced very good returns over the last 20 years. This despite the fact that we had a very strong nine year bull market in US stocks from early 2009 through early 2018.

BobK
Are you saying that the stock market is volatile ?

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Re: US Stock Market Returns in the 21st Century

Post by hdas » Fri Jan 04, 2019 2:26 pm

bobcat2 wrote:
Fri Jan 04, 2019 11:37 am
The first 19 years of the 21st century are now history. Here are the real average annual returns for the US stock market over those 19 years. A period which includes a nine year bull market as well as two market crashes.

US stock market annual average real returns from 12/31/99 through 12/31/2018.

Code: Select all

Annual average real return with dividends reinvested       3.0%
Annual average real return without dividends reinvested    1.1%  
This is great news for future returns. Holders of money have made too much relative to ideas/risk people. The ratio is stretched. Very good looking forward for risk. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 2:36 pm

Thesaints wrote.
What about high-yeld, or Chinese stocks? I mean, you picket (sic) LT treasuries. What’s the meaning of your choice, other than you chose ex-post ?
I don't have Chinese stock market data for the last 19 years. However, from the "Triumph of the Optimists" authors I do have the data for the 17 years ending in 2016. The annual real return for Chinese stocks for those 17 years was 2.7%. I chose LT Treasuries because that's what the "Triumph" authors use as their proxy for the US bond market.

I am simply reporting what the broad capital markets have done over the last 20 years or so.

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Re: US Stock Market Returns in the 21st Century

Post by TheTimeLord » Fri Jan 04, 2019 2:37 pm

bobcat2 wrote:
Fri Jan 04, 2019 11:37 am
The first 19 years of the 21st century are now history. Here are the real average annual returns for the US stock market over those 19 years. A period which includes a nine year bull market as well as two market crashes.

US stock market annual average real returns from 12/31/99 through 12/31/2018.

Code: Select all

Annual average real return with dividends reinvested       3.0%
Annual average real return without dividends reinvested    1.1%  
Link to calculation tool for stock market returns - https://dqydj.com/wilshire-5000-return-calculator/

BobK

PS - The inflation data for December 2018 is not in yet and was extrapolated from the November CPI data by the above tool. I would expect the one month CPI extrapolation error to be very small and have a negligible impact on the 19 year average real returns.
If you pick 1/3/2001 as a starting point you get 4.22% or 1/4/1999 you get 3.773%.
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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 2:40 pm

hdas wrote:
Fri Jan 04, 2019 2:26 pm
bobcat2 wrote:
Fri Jan 04, 2019 11:37 am
The first 19 years of the 21st century are now history. Here are the real average annual returns for the US stock market over those 19 years. A period which includes a nine year bull market as well as two market crashes.

US stock market annual average real returns from 12/31/99 through 12/31/2018.

Code: Select all

Annual average real return with dividends reinvested       3.0%
Annual average real return without dividends reinvested    1.1%  
This is great news for future returns. Holders of money have made too much relative to ideas/risk people. The ratio is stretched. Very good looking forward for risk. Cheers :greedy
Let's hope you're right. I hate to think that stock market returns both in the US and globally will be worse in the next 20 years than they have been over the last 20 years. :beer

BobK
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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 2:45 pm

TheTimeLord wrote:
Fri Jan 04, 2019 2:37 pm
If you pick 1/3/2001 as a starting point you get 4.22% or 1/4/1999 you get 3.773%.
So if you start in 1/3/2001 US stocks would have under performed US Treasuries over the last 18 years by only about .5% per year.

BobK
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Re: US Stock Market Returns in the 21st Century

Post by Kenkat » Fri Jan 04, 2019 2:52 pm

I don’t think 3% real is all that terrible from what was a relatively high market at the time. Especially given some of the dire warnings of zero percent real at the time. Looking through some of the other data in the report, the US equity market returned -8% real from 1905-1920. How would you like to be having that conversation right now?

I’ve tracked my yearly portfolio balance and returns since 1999 and while I am not quite where I projected to be, I am not that far off either. 2018 didn’t help much there, I was within shouting distance of my target at the end of 2017.

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Re: US Stock Market Returns in the 21st Century

Post by TheTimeLord » Fri Jan 04, 2019 2:54 pm

bobcat2 wrote:
Fri Jan 04, 2019 2:45 pm
TheTimeLord wrote:
Fri Jan 04, 2019 2:37 pm
If you pick 1/3/2001 as a starting point you get 4.22% or 1/4/1999 you get 3.773%.
So if you start in 1/3/2001 US stocks would have under performed US Treasuries over the last 18 years by only about .5% per year.

BobK
Given the quote below why are we surprised. John Bogle said in 2000 looking at the PE ratios of sticks and the yields of Treasuries he wondered why he had any money in stocks at whatsoever (discussion starts at 2:00 mark of video).

https://www.youtube.com/watch?v=k6ra5POdsYg
For the period October 1981-September 2011, the S&P 500 Index returned an annualized 10.8 percent, compared to the 11.5 percent annualized return on long-term (20-year) Treasury bonds.
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Re: US Stock Market Returns in the 21st Century

Post by aj76er » Fri Jan 04, 2019 3:38 pm

You are cherry picking. A better way to compare the two asset classes:

What was the best rolling 19yr return for U.S. S&P 500?
What was the worst rolling 19yr return for U.S. S&P 500?
What was the average distribution for rolling 19yr return for U.S. S&P 500?
What was the best rolling 19yr return for U.S. long term treasuries?
What was the worst rolling 19yr return for U.S. long term treasuries?
What was the average distribution for rolling 19yr return for U.S. long term treasuries?

You compared arguably the best 19yr period for U.S. long term treasuries with one of the worst 19yr periods for U.S. S&P 500. Informative, but it doesn't tell the whole story.
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harvestbook
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Re: US Stock Market Returns in the 21st Century

Post by harvestbook » Fri Jan 04, 2019 3:57 pm

It's almost like including the second-worst financial crisis in US history, and another one of the worst, in your data set has an effect on the numbers.
I'm not smart enough to know, and I can't afford to guess.

Thesaints
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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 3:59 pm

bobcat2 wrote:
Fri Jan 04, 2019 2:36 pm
I chose LT Treasuries because that's what the "Triumph" authors use as their proxy for the US bond market.
That's odd, because LT Treasuries are but a small part of the US total bond market.
I am simply reporting what the broad capital markets have done over the last 20 years or so.
Yep. They have been volatile. Not really a surprise.

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Re: US Stock Market Returns in the 21st Century

Post by POLO » Fri Jan 04, 2019 4:41 pm

fire4fun wrote:
Fri Jan 04, 2019 1:18 pm
POLO wrote:
Fri Jan 04, 2019 12:58 pm
I'm sure this conversation has be had countless times, but how many of you dumped your millions into the US equities market exactly on the last trading day of 1999? Exactly during the time the market was at its peak? This is why even the "90's Japan" argument doesn't make sense to me. The market was lower in the years before and after and continue to trend updwards, meaning someone did a hell of a lot better than 3.0%.
And someone did worse.
I am just not convinced that there really is "someone" there. Sure there were individuals and institutions that did worse some of the time, but I would say no one did worse all of the time. The only time they would have done worse is if they dumped their entire net worths into lotto tickets and Furbies. Recurring investments leading up to and after the bear markets will give you a much better internal rate of return.

Seriously though, cherry picking start and end dates has got to be the longest running Boglehead in-joke there is.

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bobcat2
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Re: US Stock Market Returns in the 21st Century

Post by bobcat2 » Fri Jan 04, 2019 5:35 pm

Had I wanted to cherry pick recent return data to show really bad results, I would have picked real US stock returns for the 9 year period from early March 2000 to early March 2009.

Real stock market return for nine years (March 2000 through March 2009)

annual average return -8.4%

cumulative return over the nine years -61.0%

And in early March of 2009 no one knew whether the bleeding would continue or not.

Instead I picked the returns for the last 20 years and the returns for the first 19 years of this century. It seems reasonable to me to ask how well have the US capital markets done over the last 20 years. Apparently some people think that's an unfair question. :wink:
How dare someone have the termity to show US and global stock market returns over the last 20 years!

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Re: US Stock Market Returns in the 21st Century

Post by sunnywindy » Fri Jan 04, 2019 6:07 pm

My favorite chart from AAII. 1802-2013 Total Real Return is 6.7%
https://www.aaii.com/files/images/artic ... gure-1.jpg
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Re: US Stock Market Returns in the 21st Century

Post by Nate79 » Fri Jan 04, 2019 6:30 pm

JoMoney wrote:
Fri Jan 04, 2019 12:06 pm
Here's the 'real' inflation adjusted annualized total returns from each year (assuming bought at the start of the year and sold at the start of 2019)

2000 3.009%
2001 4.208%
2002 5.010%
2003 6.876%
2004 5.766%
2005 5.586%
2006 5.631%
2007 5.155%
2008 5.637%
2009 10.796%
2010 9.489%
2011 8.847%
2012 10.427%
2013 9.615%
2014 6.502%
2015 4.758%
2016 7.192%
2017 4.283%
2018 -8.259%

(Average 5.82%)
I am confused where these numbers come from. Here are the total returns for VTSAX by year, nominal. How is there such a difference well beyond the inflation rate?

Total return
2018 -5.17%
2017 21.19%
2016 12.68%
2015 0.40%
2014 12.58%
2013 33.51%
2012 16.44%
2011 1.08%
2010 17.28%
2009 28.76%
2008 -37.04%
2007 5.59%

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JoMoney
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Re: US Stock Market Returns in the 21st Century

Post by JoMoney » Fri Jan 04, 2019 6:37 pm

Nate79 wrote:
Fri Jan 04, 2019 6:30 pm
JoMoney wrote:
Fri Jan 04, 2019 12:06 pm
Here's the 'real' inflation adjusted annualized total returns from each year (assuming bought at the start of the year and sold at the start of 2019)

2000 3.009%
2001 4.208%
2002 5.010%
2003 6.876%
2004 5.766%
2005 5.586%
2006 5.631%
2007 5.155%
2008 5.637%
2009 10.796%
2010 9.489%
2011 8.847%
2012 10.427%
2013 9.615%
2014 6.502%
2015 4.758%
2016 7.192%
2017 4.283%
2018 -8.259%

(Average 5.82%)
I am confused where these numbers come from. Here are the total returns for VTSAX by year, nominal. How is there such a difference well beyond the inflation rate?

Total return
2018 -5.17%
2017 21.19%
2016 12.68%
2015 0.40%
2014 12.58%
2013 33.51%
2012 16.44%
2011 1.08%
2010 17.28%
2009 28.76%
2008 -37.04%
2007 5.59%
The returns are using the link OP had at the top, measuring the inflation adjusted, CAGR including dividends if you bought at the beginning of each of those years and held until 2019.
https://dqydj.com/wilshire-5000-return-calculator/
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Thesaints
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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 6:43 pm

bobcat2 wrote:
Fri Jan 04, 2019 5:35 pm
Had I wanted to cherry pick recent return data to show really bad results, I would have picked real US stock returns for the 9 year period from early March 2000 to early March 2009.

Real stock market return for nine years (March 2000 through March 2009)

annual average return -8.4%

cumulative return over the nine years -61.0%

And in early March of 2009 no one knew whether the bleeding would continue or not.

Instead I picked the returns for the last 20 years and the returns for the first 19 years of this century. It seems reasonable to me to ask how well have the US capital markets done over the last 20 years. Apparently some people think that's an unfair question. :wink:
How dare someone have the termity to show US and global stock market returns over the last 20 years!

BobK
The point is that your number do not show "how well capital markets have done" (I think you mean "stock", not "capital", though).
You write yourself that choosing another interval in the same 20 years you could have got much worse figures and my observation is that one shouldn't be surprised by this: the stock market is highly volatile and it is always possible to find an interval which yielded any return you need to prove your thesis.
With two crashes, one at its beginning and one midway, who could expect the 20-year return to be anything but disappointing ?
Yet, if one invested steadily throughout the same period, his/her IRR turned out a lot better.
Vice versa, a retiree withdrawing steadily would see his/her prospects a lot less rosy for exactly the opposite reason.
Are these 20 years extraordinary, or unusual ? Not really. Once again, thanks to the market volatility we can find many other periods of comparable length with similar returns.

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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 6:52 pm

Thesaints wrote:
Fri Jan 04, 2019 6:43 pm
bobcat2 wrote:
Fri Jan 04, 2019 5:35 pm
Had I wanted to cherry pick recent return data to show really bad results, I would have picked real US stock returns for the 9 year period from early March 2000 to early March 2009.

Real stock market return for nine years (March 2000 through March 2009)

annual average return -8.4%

cumulative return over the nine years -61.0%

And in early March of 2009 no one knew whether the bleeding would continue or not.

Instead I picked the returns for the last 20 years and the returns for the first 19 years of this century. It seems reasonable to me to ask how well have the US capital markets done over the last 20 years. Apparently some people think that's an unfair question. :wink:
How dare someone have the termity to show US and global stock market returns over the last 20 years!

BobK
The point is that your number do not show "how well capital markets have done" (I think you mean "stock", not "capital", though).
You write yourself that choosing another interval in the same 20 years you could have got much worse figures and my observation is that one shouldn't be surprised by this: the stock market is highly volatile and it is always possible to find an interval which yielded any return you need to prove your thesis.
With two crashes, one at its beginning and one midway, who could expect the 20-year return to be anything but disappointing ?
Yet, if one invested steadily throughout the same period, his/her IRR turned out a lot better.
Vice versa, a retiree withdrawing steadily would see his/her prospects a lot less rosy for exactly the opposite reason.
Are these 20 years extraordinary, or unusual ? Not really. Once again, thanks to the market volatility we can find many other periods of comparable length with similar returns.
You are missing the point. He didn't just choose an arbitrary 20 year period to prove his narrative. He choose THE last 20 years. Seems like a normal conversation topic to me. If we are talking about it, the logical choice is the most recent 20 years, instead of say 1990-2009. If you happen to by chance, retire at the "wrong" time, you were hosed. Many real life examples of this. There are less volatile investment classes out there (going back 200 years) with comparable returns. Its up to you to decide how to play and what to play with.

mad_pear
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Re: US Stock Market Returns in the 21st Century

Post by mad_pear » Fri Jan 04, 2019 7:01 pm

What about the last 24 years? Or the last 17?

fire4fun
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Re: US Stock Market Returns in the 21st Century

Post by fire4fun » Fri Jan 04, 2019 7:20 pm

mad_pear wrote:
Fri Jan 04, 2019 7:01 pm
What about the last 24 years? Or the last 17?
24 or 17 years wouldn't be "21st century returns". 17 years would be an incomplete version of that.

Thesaints
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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 7:32 pm

fire4fun wrote:
Fri Jan 04, 2019 6:52 pm
You are missing the point. He didn't just choose an arbitrary 20 year period to prove his narrative. He choose THE last 20 years.
The last 20 years are not any more special than the 20 years 1998-2017. It is not that one is more representative than the other. Furthermore, why calculate returns from Jan 1 to Dec 31 ? In 2018 the S&P 500 swung between 2941 and 2347. Which value should we use when comparing to another year to calculate returns ?

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Re: US Stock Market Returns in the 21st Century

Post by Raybo » Fri Jan 04, 2019 7:34 pm

So, for investors that were 100% US Stocks, their 19 year return was 3% real (with reinvested dividends).

But, few people are 100% US Stocks for 19 years. I wonder how things would have been for someone maintaining a specific AA who rebalances?

The rebalancing bonus from selling bonds to buy stocks in 2008 is enormous (3x if my capital gains calculations are correct). The same is likely true for people rebalancing out of stocks at the recent all-time highs.

While the data are interesting. For me, they aren't all that realistic.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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Re: US Stock Market Returns in the 21st Century

Post by Thesaints » Fri Jan 04, 2019 7:35 pm

Raybo wrote:
Fri Jan 04, 2019 7:34 pm
So, for investors that were 100% US Stocks, their 19 year return was 3% real (with reinvested dividends).

But, few people are 100% US Stocks for 19 years. I wonder how things would have been for someone maintaining a specific AA who rebalances?
Fewer still were 100% in stocks on January 1st 2000 and didn't buy, nor didn't sell anything up to now.

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