Worst Decade Ever

The Wall Street Journal tallies up how bad this decade has been:

With two weeks to go in 2009, the declines since the end of 1999 make the last 10 years the worst calendar decade for stocks going back to the 1820s, when reliable stock market records begin, according to data compiled by Yale University finance professor William Goetzmann. He estimates it would take a 3.6% rise between now and year end for the decade to come in better than the 0.2% decline suffered by stocks during the Depression years of the 1930s.
The past decade also well underperformed other decades with major financial panics, such as in 1907 and 1893.
“The last 10 years have been a nightmare, really poor,” for U.S. stocks, said Michele Gambera, chief economist at Ibbotson Associates.
While the overall market trend has been a steady march upward, the last decade is a reminder that stocks can decline over long periods of time, he said.
“It’s not frequent, but it can happen,” Mr. Gambera said.
To some degree these statistics are a quirk of the calendar, based on when the 10-year period starts and finishes. The 10-year periods ending in 1937 and 1938 were worse than the most recent calendar decade because they capture the full effect of stocks hitting their peak in 1929 and the October crash of that year.
From 2000 through November 2009, investors would have been far better off owning bonds, which posted gains ranging from 5.6% to more than 8% depending on the sector, according to Ibbotson. Gold was the best-performing asset, up 15% a year this decade after losing 3% each year during the 1990s.
This past decade looks even worse when the impact of inflation is considered.
Since the end of 1999, the Standard & Poor’s 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University. His data use dividend estimates for 2009 and the consumer price index for the 12 months through November.
Even the 1970s, when a bear market was coupled with inflation, wasn’t as bad as the most recent period. The S&P 500 lost 1.4% after inflation during that decade.
That is especially disappointing news for investors, considering that a key goal of investing in stocks is to increase money faster than inflation.
“This decade is the big loser,” said Mr. Jones.

Here’s a cool graphic.

Posted by on December 21st, 2009 at 9:40 am


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