The Next 20 Years

There was an article in Barron’s over the weekend, It’s Been a Rough 20 Years for Stocks. The Next 20 Should Be a Lot BetterThe first part of that headline is factually correct. From 1999-2018, the stock market experienced two crashes, and investors received just 5.6% annually for their troubles. Over the same time,  the Barclays aggregate bond index gained 4.6% and experienced a max drawdown of less than 5%.

Looking at the chart below, sure stocks came out ahead, but did they adequately compensate investors for all of the sleepless nights? In my opinion, they did not.

Which brings us to the second part of the headline, “The next 20 years should be a lot better.” Historically, this is true. As you can see in the chart below, if U.S. stocks experienced a lousy twenty years, the next 20 generally did quite well.

In the 20 years following the peak in 1929, stocks returned a paltry 1.9%. And in the twenty years following that, they returned 14.3%.

Here’s the problem with data points like this, I don’t think they’re particularly meaningful. Does having this information make you feel any differently about your investments? Will it help you stay the course during the next this bear market?

20 years is a long time.

The fact that a 5.6% annualized return is the worst twenty year period for stocks tells you a lot about how strong the U.S. stock market has been over the last century. Unfortunately it doesn’t provide any clarity into the future.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.