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THE S&P500: HISTORICAL 54-YEAR RETURNS

March 4, 2024
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It's all in the cycles

 

Many investors started investing during 2020 and 2021 and are currently seeing some negative returns in their portfolios. This article is aimed at helping you zone out a bit. Chances are great that there is nothing wrong with your investment plan, but your negative returns is a result of market conditions. Grab a drink and jump in, its not you, it is cycles.

 

The S&P500 index is one of the most widely used benchmarks for measuring the performance of the US stock market. The index tracks the performance of the 500 largest publicly traded companies in the US and is considered a proxy for the overall health of the US economy. Over the past 54 years, the S&P500 has seen some significant ups and downs, with periods of strong growth and sharp declines.

 

From 1969 to 1971, the S&P500 saw negative returns in two out of three years. In 1969, the index fell by 8.63%, and in 1970, it declined by 5.77%. However, the index rebounded in 1971, posting a return of 14.31%. This period was characterized by a struggling economy, high inflation, and rising unemployment. The Vietnam War was still ongoing, and there were concerns about the stability of the US dollar. These factors contributed to the volatility in the stock market during this time.

 

The 1970s were a tumultuous period for the US economy, and the stock market was not immune to the turmoil. The S&P500 saw significant declines in 1973 and 1974, with returns of -14.31% and -26.47%, respectively. The early 1970s were marked by rising inflation and high interest rates, which put pressure on corporate earnings. The oil crisis of 1973 further contributed to the economic downturn, as the price of oil skyrocketed, leading to higher energy costs and reduced consumer spending. The 1970s ended on a positive note, with strong returns in 1975 and 1976, of 37.20% and 23.84%, respectively. These gains were driven by a rebound in the economy and the end of the oil crisis.

 

The 1980s were a period of economic growth and prosperity, and the S&P500 saw significant gains during this time. In 1980, the index posted a return of 32.42%, followed by gains of over 20% in 1982, 1983, and 1985. The economy was booming, and corporate earnings were strong, thanks in part to tax cuts and deregulation policies. The 1980s also saw the rise of the personal computer, which spurred innovation and growth in the technology sector. The decade ended with strong returns in 1989 and 1990, of 31.69% and -3.10%, respectively.

 

The 1990s were a decade of unprecedented growth in the stock market, and the S&P500 saw some of its strongest returns during this time. The 1990s were marked by a booming economy, low inflation, and low interest rates, which fuelled corporate earnings and investor confidence. The technology sector was a major driver of growth, with companies like Microsoft, Intel, and Cisco seeing significant gains. The S&P500 posted gains of over 20% in six out of ten years during the decade, including a return of 37.58% in 1995. The decade ended with strong gains in 1999 and 2000, of 21.04% and -9.10%, respectively.

 

The early 2000s were marked by a sharp downturn in the stock market, known as the dot-com crash. The bubble in the technology sector burst, and many companies saw their stock prices plummet. The S&P500 saw negative returns in three out of four years, with declines of over 20% in both 2001 and 2002. The US was also dealing with the aftermath of the September 11 terrorist attacks.

 

The S&P500 saw strong gains in the mid-2000s, as the U.S. economy recovered from the dot-com crash. The housing market was booming, and low interest rates fueled consumer spending. However, the Great Recession of 2008 put an end to this period of growth. The subprime mortgage crisis led to a significant decline in the housing market, which in turn had a ripple effect on the entire economy. The S&P500 experienced significant declines in 2008 and 2009, with returns of -37.00% and 26.46%, respectively.

 

The U.S. government and Federal Reserve responded to the Global Financial Crisis with a series of stimulus measures, including bailouts of banks and other financial institutions. These measures helped to stabilize the economy and the stock market, and the S&P500 began to recover in 2009. The index posted gains of over 20% in 2009, 2010, and 2012, and the overall return for the decade was 7.31%. However, the index also experienced significant volatility during this time, with sharp declines in 2011 and 2015.

 

The 2010s saw a period of relative stability and growth for the S&P500. The U.S. economy continued to recover from the Global Financial Crisis, and corporate earnings were strong. The Federal Reserve kept interest rates low, which fuelled consumer spending and investment. The technology sector was a major driver of growth, with companies like Apple, Amazon, and Facebook seeing significant gains. The S&P500 posted gains in eight out of ten years during the decade, with an overall return of 13.56%. The index reached record highs in 2019 and 2020, driven by strong earnings and investor optimism.

 

The COVID-19 pandemic had a significant impact on the S&P500 in 2020. The pandemic led to a global economic downturn, and the S&P500 experienced significant declines in March of 2020. However, the Federal Reserve and U.S. government responded with a massive stimulus package, which helped to stabilize the economy and the stock market. The S&P500 rebounded strongly in the second half of the year, and the index ended 2020 with a return of 16.26%.

 

The first half of 2021 saw continued growth for the S&P500. The U.S. economy continued to recover from the pandemic, and corporate earnings were strong. The Federal Reserve continued to keep interest rates low, which supported investment and consumer spending. However, the second half of 2021 saw increased volatility in the stock market, driven by concerns about inflation, supply chain disruptions, and the spread of the Delta variant. The S&P500 ended the year with a return of 28.71%.

 

The S&P500 ended the first quarter of 2022 with a return of 6.17%, but ended the year down 23.3%. The war between Russia and Ukraine put significant pressure on global supply chains and continues to do so into 2023. In addition to these factors, there are also ongoing debates about the role of the Federal Reserve and other central banks in the stock market. Many investors are concerned that low interest rates and quantitative easing programs were artificially inflating the stock market, and there are fears that a change in these policies could lead to significant declines in the S&P500 and other indices.

 

Despite these concerns, many analysts remain optimistic about the long-term prospects for the S&P500. Over the past several decades, the index has delivered strong returns to investors, and there is little reason to believe that this trend will not continue in the future. Indeed, many companies in the index are leaders in their industries, and they are likely to continue growing and generating strong earnings in the coming years.

 

The U.S. economy is still one of the largest and most dynamic in the world, and it is likely to continue growing over the long-term. As a result, the S&P500 is likely to continue benefiting from the underlying strength of the U.S. economy, even as it faces short-term volatility and uncertainty.

 

There are always risks and challenges ahead for the S&P500, as there are for any investment. Investors must be prepared for periods of volatility and declines, and they should be focused on building a diversified portfolio that can withstand market fluctuations.

 

 

 


 


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