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20 years at 4%

Nope, not a bond yield.

Today is the 20th anniversary of the peak of the dot-com bubble. According to the Leuthold Group, returns for the S&P 500 have averaged 4.4% per year from that date to this one. The MSCI Emerging Markets and Barclays Bond Aggregate have had identical 5% returns. Mid-caps and small caps have substantially bested all three.

Among the sliced and diced domestic sub-sectors:

S&P 500 High Beta: -1.4% annually
S&P 500 Low Volatility: 9.2%
S&P 500 Dividend Aristocrats: 9.3%
FSTE NAREIT Index: 9.0%
Spot gold: 9.0%

Of course measuring for the moment before one market collapse to a moment somewhere within another one is weird and unrepresentative. We ought all remember that the next time someone tries pedaling an investment based on its 3- or 5-year returns when those returns fall within a window of steadily rising prices.

See? I'm an optimist! I'm foreseeing the New Bull and the New Bull marketing campaigns.



  • @David_Snowball; Your glass is half full, enjoy !
  • So, David, question for clarity: the noted averages do not take into account volatility, do they? So I higher average return strategy might have a lower cumulative return. Correct?
  • edited March 27

    Hmm ... how are they tracking Div Aristocrats back 20y, do they say? Or the others?

    VOO (best SP500 I know of) outperforms NOBL (Div Aristocrat) since NOBL inception, ~6.5y ago, and CAPE trounces both (also trouncing DVY and SDY), so it would be good to see graphs going back thrice that time.

    Roger all else; start and stop points are all.
  • I’d love to see the details! Low volatility & dividend aristocrats beat the S&P 500 by 2:1? Obviously, significant. And mid caps & small caps also significantly beat the S&P 500? I guess it’s value & SCV that has done poorly.
  • Hi, Shostakovich.

    Exactly. Though I didn't pull the numbers, I'm guessing that bonds and EM stocks had ... ummm, modestly disparate levels of volatility. That's partly why I placed them side-by-side.
  • I've asked for permission to reproduce the two graphics from today's Research Note in our April issue. One gave the returns for about 20 assets or indexes and the other compared current valuations to today's. I'll share if I'm allowed.

    Other highlights from today's Leuthold note:
    ... these results mostly reflect how exorbitant valuations were at the start of that 20-year span, and not how depressed they are today.

    ...the S&P 500 isn’t yet statistically cheap, but it is vastly more attractive than it was just five weeks ago.

    ... not a single equity sector generated a double-digit annualized return over the last 20 years, nor did any major asset class.

    Incredibly, the S&P 500 Energy sector (+2.4%) and Technology sector (+2.7%) delivered about the same results to those who bought them in March 2000 and held on for the ride.

    In sum, initial valuations matter, and the only good thing to come out of the last five weeks’ action is that the “cost of entry” into the S&P 500 has finally closed in on its historical average, and almost all other stock market cohorts (domestic and international) are well below their averages. Veteran investors will recall that the Y2K peak proved to be an excellent time to shift into Mid and Small Caps, and it’s worth noting that median valuations for these stocks are 15-25% below those prevailing at that historic turning point. Keep this good news in mind when dealing with the coming onslaught of bad news.
  • "... not a single equity sector generated a double-digit annualized return over the last 20 years, nor did any major asset class."

    Letting that sink in a minute. That's harsh Dude.
  • Yes, exactly. That's why I love looking at rolling returns. You can't decide the year you were born and the 20-year period(s) you were invested. Going back 60 years through February, the S&P 500 delivered anywhere from 5.6% to 18.3% annualized over 481 20-year rolling periods. Timing is everything.
  • Of course, the two 50% drawdowns and the 3 bear markets over this period have helped keep millennials away from investing. I actually think they were finally starting to warm-up to it, until this March's madness.
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