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Perspective On This Secular Bull Market’s Long-Term Returns

By Brian GilmartinStock MarketsNov 29, 2020 12:58AM ET
Perspective On This Secular Bull Market’s Long-Term Returns
By Brian Gilmartin   |  Nov 29, 2020 12:58AM ET
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The weekly S&P 500 earnings update will be out shortly, but after dropping the current numbers from Refinitiv into the spreadsheet tonight, there doesn’t seem to be much change to the earnings outlook. However, the data will be looked at further before publishing.

Another post was (in my opinion) more noteworthy, thus here it is: if you look at the long-term annual returns of this secular bull market (and we can start the clock on any number of dates), the returns so far are pretty “average” in terms of the long-term returns on large-cap stocks, i.e. the S&P 500.

The so-called Bible of return data is Ibbotson’s Stocks, Bonds, Bills & Inflation (SBBI) data, and although the data has gone underground thanks to its inclusion in the Morningstar Advisor workstation (as I understand it) and is not able to be purchased for advisor consumption, it still pops up on occasion.

Still, in what may have been a publishing error by the CFA Society of Chicago, the Ibbotson data found it’s way on the website and my first thought was, “Wow, haven’t seen this in a while.” (It shortly disappeared from the website not too long after showing up.)

The important metric found in the data was that for the 97 years from 1923 to 2020, the long-term “average” return for large-cap stocks (i.e. the proxy being the S&P 500) was roughly 12%-13% per year, over that timeframe.

Using YCharts, a neat little fundamental and technical service out of Chicago, here are the average, annual returns for the S&P 500 (including reinvested dividends) for various time periods, both before and after 2008:

  • 1990 – 1999: +17.95%
  • 1990 – 1994: +8.85%
  • 1995 – 1999: +28.37% (the large-cap growth and tech / bubble)
  • 1990 – present: +10.72%
  • 2000 – present: +6.46%
  • 2000 – 2009: -0.95% this was very surprising. I was under the impression the “average, annual” return was closer to 1% for the S&P 500, for the decade.)
  • 03/09/2009 – present: +17.79% average, annual return (decade and generational low for S&P 500 after Mortgage Crisis)
  • 2010 – 2019: +13.86% (decade average)
  • 2010 – present: +13.7% average, annual return (start of new decade)
  • May 1, 2013 – present: +13.88% (approximate date the S&P 500 traded above the March, 2000 and October, 2007 highs around 1,550 – 1575)

Summary / conclusion: While the last 9-10 years returns indicate that the new bull market is right in line with long-term average returns for the S&P 500, the decade from 1.1.2000 through 12.31.2009 dramatically lowered the long-term average returns and, another stat I found surprising was that the average, annual return for the last 20 years is still well below the long-term average of 12%-13%.

Currently (meaning the last month), sentiment has gotten very bullish, although breadth is still supportive of the benchmark.

The current decade including 2020, is starting to creep up towards the 1990-1999 average, but if you look at the above data, look at the first half and then the last half of the last decade of the 20th century and you’ll see that all the return came in the last half of the decade.

You could make the case that while the S&P 500 is currently overbought and needs a 3%-5% pullback, looking at the 1990-present average, annual return, and then the 2000 to present average, annual return, both metrics remain below the long-term averages.

No doubt all of this is supported by generational low interest rates.

We are in the midst of what might be called just an average bull market. However—as the old saying goes—you can still drown in a lake whose average depth is 3 feet deep.

For long-term investors this is good perspective. For day traders and shorter time period traders this data is likely worthless. Take it all with a healthy skepticism.

Perspective On This Secular Bull Market’s Long-Term Returns

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Perspective On This Secular Bull Market’s Long-Term Returns

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