Secular real return from stocks since investing at the August 2000 high compared with investing at the September 1929 high, twenty-four years out

 August 2000-August 2024 and September 1929-September 1953 both fall far short of 8.74% per annum real return September 1953-August 2000.

Real per annum return from January 1871-September 1929 was 8.34%.

 

 

 

Despite record highs in stocks in 2024, real return since the last secular peak in August 2000 still significantly lags previous periods of peak-to-peak returns

 

During four months in 2021, real return since August 2000 briefly hit the 5s: 5.06% in August, 5.02% in September, 5.17% in November, and 5.15% in December.

Real return swooned after that, as low as 3.63% in October 2022, making it seem like 2021 might have been a secular turning point.

But by October 2024 real return since August 2000 had recovered to 5.11%, and 5.2% in November, and 5.24% in December.

Is this the new secular peak?

Return might suggest, No, seeing how low it still is.

Valuation might suggest, Yes.

The annual average of the S&P 500 divided by GDP in trillions hit 186 in 2024, a level not seen since 1930 (228) on an annualized basis.

That ratio never got above 139 (2000) between 1937 (165) and 2020 (151).

And this ratio was 180 in 2021, 158 in 2022, and 155 in 2023, all unprecedented for the post-war.

But 186 in 2024 really takes the cake.

The price of the market is really, really rich for the return you get.

 

Real return from stocks was better under Trump I than under Biden

 

S&P 500 average real return, dividends fully reinvested

Nov 2016--Nov 2020: 13.18% per annum

Nov 2020--Nov 2024: 9.97% per annum

On a nominal basis it was a draw, that's how bad inflation was for stocks: Trump 15.33% per annum vs. Biden 15.39% per annum.

 

Although the Reagan Bull from July 1982--August 2000 was spectacular, yielding 18.99% nominal and 15.28% real, the actual Reagan era itself was still a huge battle with inflation

Nov 1980--Nov 1984: 10.5% nominal, 4.9% real

Nov 1984--Nov 1988: 17.06% nominal, 13.22% real.

Your reminder that average real return from stonks sux

S&P 500

 

August 2000 -- August 2024

4.90% per annum

August 1976 -- August 2000

10.49% per annum

 

 

The Buffett Indicator in the news

Some people are paying attention.

The last chart below tracks the average annual valuation from 1920 through last year, based on the S&P 500. The average level for 2024 will depend on the third and final estimate of annual GDP at the end of March 2025. 209% is a real time snapshot using the Wilshire 5000 index.

Rosie throws in the towel and BlackRock declares the boom and bust cycle over

 Gee, when have we heard that before lol?

Real return from stocks since the August 2000 top after 24 years now underperforms the pre-2000 eras by ONLY 33.7% per annum, nominal by 21.3%, yippee! What a great country!

It's been 23 years of not a bull market

 Average real return per annum from $SPX, dividends fully reinvested:

August 2000 to August 2023:  4.23%

August 1977 to August 2000: 11.35%

 

Real return since August 2000 has been Great Depression-like

 

The investing world's experts, let alone all the sheeple who follow them, don't have a CLUE how bad this market has been since August 2000

 The TOP, do you hear me, was in already last November.

As of May 2022 real return has pulled back all the way to 4.14%.

We truly live in a new period of suck.

 

 

How low could the S&P 500 possibly fall from the Monday, Jan 3, 2022 closing high of 4,796.56?

 Some are calling this a dot-com-like bubble "burst". 

Jeremy Grantham thinks a 40% decline is in the offing.

That burst happened gradually, actually, from August 2000 to February 2003, more like an old balloon slowly deflating in the corner of the room under a table months after the party had ended.

On an average basis, the S&P 500 fell from 2471.50 in August 2000 to 1314.31 in February 2003, in March 2022 dollars. That 1157.19 point drop amounted to a drop of 46.82%.

Before climbing to the spectacular heights we know today, the S&P 500 had another appointment with more bad news, unfortunately, in March 2009, achieving an even lower level than February 2003.

In March 2022 dollars, the S&P 500 bottomed in March 2009, again on an average basis, at 1023.36. That was 1448.14 points from 2471.50 in August 2000, a drop of 58.59%.

That was quite a long process, a very bad, no good, rotten almost a decade for stocks. Real per annum return August 2000 through March 2009 averaged  -8.14%.

Many children watched their parents lose everything, including the house.

Those February 2003 and March 2009 type of events must be recognized as within the realm of real possibility even today.

4796.56 minus 46.82% would put the S&P 500 at 2551.

Minus 58.59% . . . 1986. 

Not saying it will happen. Not saying it's even probable. Just possible, because it has happened before.

Smart investors are ready for the possible.

The index is down 18.19% from the all-time-high tonight.

 

The biggest investing lie of our times: "A host of factors ... has made U.S. equities an attractive place to park money and earn nice returns"

 CNBC, here.

S&P 500, average real return per annum, dividends fully reinvested:

August 2000 through April 2022, 21 years, 8 months . . . 4.6%;

The 21 years, 8 months previous to that, December 1978 through August 2000 . . . 12.35%. 

At 4.6% it takes about 15.5 years to double your money, at 12.35% just under 6 years, which means under current circumstances you haven't yet doubled your money twice, whereas previously you would have doubled it 3.6 times.

The stellar real returns to the August 2000 top have been cut down since then from 12.35% to 8.41%. How long will it be before they are cut back to 6.44%, the long term real return from January 1871 to December 1978?

The odds are not very long.

Those stellar returns of the second half of the 20th century are an artifact of The Great Depression lows. To achieve them again will require another one.

Safety check, Vern.

The 20th anniversary of the end of the Reagan bull in August 2000 shows stock market return hasn't been just sub-bull, it's been sub-normal

Average per annum real return from the S&P 500 in the last 20 years has underperformed the 100+ years up to the beginning of the Reagan era by 36.8%.

Don't even begin to THINK return has compared with the era of the Reagan bull. This isn't a bull market, let alone a normally performing market.

Remember, this is real return, not nominal. 

 

Stonks continue to SUCK since August 2000: July 2020 edition

Meanwhile the secular bear market in stocks since August 2000 rolls on in April 2020

Return in the last 19.6 years lags the previous period of equal length by 75%, and lags long term return before that by 52%. 

The current secular bear market in stocks matched the length of the Reagan secular bull in September 2018

Average investors since August 2000 have underperformed the great Reagan secular bull market by nearly 70% annually through September 2018, but the current secular bear marches on.

Average investors aren't just severely underperforming the Reagan bull, however. The average 5.77% per annum return since August 2000 also underperforms the S&P 500 annually from 1871-1982 . . .  by 29%.

When the current secular bear ends is anyone's guess. While already long in the tooth, there's nothing that says it can't last even longer.

But you'll know it's over when stocks are universally shunned, as they were in the summer of 1982. Unfortunately, that would mean the S&P 500 would have to fall, and fall hard and deep, from here. In a worst case scenario that would mean to a level of, say, 283, which is today's inflation-adjusted level of the S&P 500 in July 1982, 89.6% south of yesterday's close at 2728. That's what it would take to match that buying opportunity, not just of a lifetime but of the whole history of the S&P 500.

On an inflation-adjusted basis a more likely future washout range would include a level something well north of 283, however, say between December 1987 at 527 and March 2009 at 898. The feeling has always been that the catastrophe of 2009 was arrested by draconian interventions, and that the market wasn't allowed to do its work and destroy the weak as it should have.

The Reagan secular bull was an extreme outlier in the history of the market. Nemesis is still lurking out there somewhere in its relentless quest to revert to the mean. Best not to stand in its way. 

Stock market boom? What stock market boom? It's been a bear market for return since August 2000 . . .

. . . and it could easily continue to be a bear market for return for three more years. The average length of the last three secular bears was 20 years, and we're only at 17.4 years through January 2018. Or, it could all end Monday in tears. Have a nice weekend!

As good as you think it's been, average return is underperforming the long term average of 9.13% by almost 38%.

HaHaHa, HaHaHaHaHa: I got your "booming economy" right here, fella

The Reagan bull ended in August 2000 with final average nominal per annum return of 18.99%, real 15.28%

It's hard to escape the conclusion that US GDP has been highly dependent on fertility

Peak Baby Boom 1952-1957 when births per 1,000 of population averaged 25.17 (graph 1) is probably the simplest explanation for outsized GDP performance during the years when this generation turned 22 from 1974-1979. More babies in the 1950s equaled more GDP come the late 1970s.

We only wish for that GDP now.

Jimmy Carter, elected in 1976, still owns the best 4-year GDP record in the post-war, despite everything you've been told (graph 2). It's nothing special he did really, it's just that in 1975, the year before his election, you had the very peak of the Baby Boom turn 18, those born in 1957 when births per 1,000 hit 25.3 for the second and final time in the post-war. They and the rest of their cohort were ready to consume in numbers never seen before. Their era spanning from Nixon/Ford from 1972 when the first of them turned 20 through Reagan in 1984 when they turned 32 represents the coming of age of America's most powerful economic demographic and the period when America's GDP performance hit its highest levels (average 46.3%).

Their failure to have enough children themselves, however, is also a big part of the explanation for the GDP trend heading south after their time. They consumed, but they did not at all produce children like their parents had. In fact, the nadir of births per 1,000 before the current period occurred from 1972 to 1977, precisely the period exactly 20 years after peak Baby Boom 1952-1957. Births per 1,000 averaged just 14.92 during this period, a rate nearly 41% lower than their parents' era. So the most prolific fruit of the Baby Boom had gone on to become themselves the least prolific, having the fewest children ever.

Not surprisingly, without enough bodies the economy inevitably began to run out of gas starting about two decades after that. Clinton era GDP performance was never as good as Reagan's, and the era was marked by various warnings, not the least of which were the bond debacles of 1994 and 1999. The great Reagan bull market ended in August 2000, a recession ensued in 2001, average S&P 500 return has been reduced to 5.2% per annum over the last 17 years, and the GDP growth rate after Clinton has averaged just half what it averaged before Carter (16% vs. 32%). No wonder the trend is down so dramatically (graph 3).

The solution?

Have LOTS more kids, and wait 20 years, if you want America to still be America, that is. Otherwise, let in even more than the 1 million immigrants we already let in annually, and prepare to kiss your country goodbye.

But don't hold your breath. Births per 1,000 have fallen to an average of just 12.5 for the five year period 2011-2015.

They don't call it the suicide of the West for nothing.

graph 1

graph 2

graph 3

Full-time job growth under Trump so far beats Obama and Bush, but that's about it

Note that employers panicked under Obama and fired people like crazy after his election, so there was a steep decline in full-time.

So far the growth of full-time shows a tentative thumbs-up to Trump, but still nothing like the vote of confidence typical after previous changes at the helm of state.

The puny 2.5% growth under George W. Bush, keep in mind, was still all pre-911 and post-Reagan bull market, which ended in August 2000. Trump is doing better than Bush, but not by much.