Stock Market Performance Dismal, if You Really Look

With all of the new, all-time highs set over the past year or so, stock market participants seem to have the idea that stock market performance has been really good.  It has, if you only look at what stocks have returned since the March 9, 2009 bottom (we are up 180 percent from the 666 intraday low).  However, if we look at stock performance from the 2007 peak, or from the peak of the tech bubble, stocks have performed quite poorly.

The NASDAQ Composite hit an all-time intraday high of about 5,200, and a closing high of 5,047.90 back in March of 2000.  The index sits at 4,333 right now, which means it is down almost 17 percent from its all-time high.  The S&P 500 peaked at 1,565 in 2007, and currently sits at about 1,875, up about 20 percent over the past 6 1/2 years.

If we look at the Wilshire 5000 index, one of the broadest stock market measures, stocks have only returned a pitiful 5.9 percent per year since the 2007 high, and 3.6 percent since the 2000 peak of the tech bubble.  Even worse, the average advisor has only returned 3.6 percent since the 2007 peak and 3.4 percent since the 2000 tech bubble peak.

The average annual return for stocks over the past century is about 10 percent, so the returns just stated are well below that average.  If we take inflation into account, stocks have only added 1.3 percent per year since the 2000 tech bubble peak.

What is even more concerning is that we appear to be at a peak again (obviously we are hitting all-time highs and valuations are quite expensive, so it seems reasonable to think the market is forming a top).  If stocks have a poor year this year, those rates of return stated above will look even worse.

We are now, officially in the 6th year of the bull market.  Historically there have been only 3 bull markets since World War II that lasted more than 5 years.  Of those, the 1987 crash followed in the 6th year of 1, and the 2008/9 crash followed another.  Not a great track-record for comparison.

 

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