Stock market returns history
We know that stocks average a return around +10% or so over many decades. We also know that the indexes rarely hit that +10% number, instead delivering years that are substantially positive, substantially negative, or just plain unchanged more often than not. Chart 1 below gives us the historical distribution of stock market returns.
Chart 1: Historical U.S. Equity returns
Source: MarketWatch
We see that stocks have generated a positive annual return 71% of the time, losing money 29% of the time. The range of returns is huge from +/- 50% per year. However, those outlier positive years are well in the past. The market has not delivered more than +40% in almost 60 years. But returns have been generally steadier with only six losing years since 1980. That’s a 17% losing rate, well below the 29% historical number. Are stocks overdue for a greater period of losing years? Or has the market figured out how to be more consistently positive? The nearly non-stop uptrend of the 1980s/1990s skews the results positive in recent decades with the “lost decade” of the 2000s being marked by two large losing years rather than a string of weakness.
What is your source for charts?
The charts we post as part of our weekly commentaries come from a wide variety of sources, which we try to annotate. The charts we create, however, are almost always done in stockcharts. Stockcharts has a powerful set of tools, clear, clean charts, and all at a very reasonable price.
Market Update
A rise in the commodity patch got stocks off to a positive start Monday. But the last day of February encountered a bout of selling through the afternoon to end the day down -0.8% and leave stocks lower on the month. For the second month in a row, stocks slumped badly through the first half of the month before rebounding to recoup some of the losses. Stocks ripped higher to kick off the month of March with Tuesday’s trade adding +2.4%. It was a broad-based rally fueled by a better-than-feared manufacturing report which set back the calls of a coming recession. Positive economic data continued into Wednesday with stocks rising another +0.4%.
Exxon (XOM) reiterated their dividend intentions thus dampening fears of coming dividend cuts in the sector. A third day of stock gains (+0.4%) Thursday with energy shares once more showing strength. Stocks added a fourth day of gains Friday to keep the month of March perfectly green so far. +0.3% was the tally on a solid monthly employment report though wage growth was lacking.
Warm wishes and until next week.