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Over the last 84 years, the after-inflation return of the stock market (including dividends) has been about 6.6% a year. Historically, that number has been about 7%, but thanks to recent years it's come down a lot.

What this means is that, on average, stock investors have doubled their money in real terms every 11 years. Of course, that's an average. Over the last 11 years, the stock market hasn't made any money in real terms.

Here's a look at the inflation-adjusted total return along with a 7% trendline:

Here's a look at the same chart, but I divided the black line by the blue line.

In other, this shows how the market is doing relative to its long-term trend. Interestingly, there are long stretches where this line looks somewhat similar to a P/E Ratio graph which shouldn't be that surprising.

Looking at this chart, you can really see how poorly the stock market has done over the past decade. I also think it's interesting that the peaks and troughs seem to line up at 2.0 and 0.5, but I may be seeing a connection where there isn't one.

Posted by edelfenbein at February 2, 2010 11:41 PM