95-99 ReturnsFrom today’s WSJ, comes this (amusing) article about the past decade:  Its the worst equity performance in nearly 2 centuries.

Why do I say amusing?

Because despite what many fools and asshats were claiming in the 1990s, stocks can only gain so much relative to earnings. Sure, other factors like population growth, economic expansion, productivity gains, all matter on the margins, but the bottom line is Earnings. But over the long haul, there is only so far you can run ahead of historical median rates of return.

The current horrific decade lost half a percent each year on average versus average annual returns of about 10-12% over the past century. Why? This under-performance is payback for the massive gains in the salad days of the late 1990s. As the table at right shows, the gains were far above median.

There is only so far you can deviate from the historical mathematical norm before mean reversion rears its ugly head.

Here’s the WSJ:

“Even with the rebound this year, the U.S. stock market is on the verge of posting its worst performance for any calendar decade in nearly 200 years of American stock-market history.

Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.

In the process, the market has provided a lesson for ordinary Americans who used stocks as the primary way of saving for retirement.

Many investors were lured to stocks by the big bull market that began in the early 1980s and gained force through the 1990s. But coming out of the 1990s, the best calendar decade in history with a 17.6% average annual gain, stocks simply had gotten too expensive. Companies also pared dividends, cutting into investor returns. And in a time of absolute financial panic like 2008, stocks usually were the worst place to be.

With just 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 all the way back to the 1820s, when reliable stock-market records began, according to data compiled by Yale University finance professor William Goetzmann.

It edges out the 0.2% decline stocks suffered during the Depression years of the 1930s, which up until now held the title of worst decade. And it is worse than other decades with financial panics, such as in 1907 and 1893.”

Repeat after me: There is no free lunch. A decade of out-performance will be p[aid back one way or another.


Stocks’ ‘Nightmare’ Decade
U.S. Market’s Performance Since End of 1999 is Worst in Almost 200 Years
WSJ, DECEMBER 20, 2009, 4:33 P.M. ET


Category: Investing, Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “Stocks 1999-2009: Worst. Decade. Ever.”

  1. krice2001 says:

    So can a decade of market underperformance lead to a renewed period of strong performance following? Or would that still require real economic growth…? and maybe expanding sales and profits…?

  2. Greg0658 says:

    dropped in 2&half hours ago and I’m gonna be 1st .. wake up you hibernating bears .. theres 4 shopping days left

    OnT – out here in the wilderness .. gotta wakeup to the fact we sold the factory during the Clinton WH and GOP controlled 90s and now what .. those other lands work much cheaper and oil is reasonably priced for the shipping element

  3. Greg0658 says:

    awh – beat me out the gate

  4. ZackAttack says:

    Better off in long bonds for how many decades now?

    This table only looks at the S&P vs the 10 year bond. I suspect the results would be even more disparate for the 30y.


    And, of course, this bubble will pop, too.

  5. maynardGkeynes says:

    Beyond that, I have zero trust in the earnings they do report.

  6. Moss says:

    Bush’s Supply-Side Boom – Per Larry Kudlow …. March 5, 1995.
    Witness the economic power of lower marginal tax-rate incentives.

    The economy is on a tear. You might not know this from coverage in the mainstream media, which may have a built-in bias against George W. Bush. Sure, some big outlets like the New York Times have come around at least somewhat on the president’s freedom-and-democracy revolution in the Middle East. But they’re not about to concede on the economic power of lower marginal tax-rate incentives.

    All phony baloney partisan, ideologue based balderdash. Talk about a built in bias.. this guy defines the term in more ways then one.

  7. ZackAttack says:

    Re: Kudlow…. one definition of economics is “mathematics bent to the service of political propaganda.”

  8. [...] Wall Street Journal says that stocks are on track to register the worst decade performance ever. Yes, even worse than the 1930’s. Wow–that’s saying [...]

  9. JamesR says:

    Fortune magazine, Mr. Buffett on the Stock Market, November 1999: “You know, someone once told me that New York has more lawyers than people. I think that’s the same fellow who thinks profits will become larger than GDP. When you begin to expect the growth of a component factor to forever outpace that of the aggregate, you get into certain mathematical problems.”

  10. willid3 says:

    i am thinking stocks can only do well if the real economy is. and it never really did in the last 10 or so years.

  11. ….so they really were out to get me

  12. [...] By all accounts this was the worst decade for stocks in well over a century.  (WSJ also Calculated Risk, Falkenblog, Big Picture) [...]

  13. jus7tme says:

    I would like the same analysis repeated with a SLIDING 10-year window, that is, a window starting EVERY year.

    You don’t want to skew the perspective by sampling only 1/10 of all the possible 10-year periods,
    which is what the above analysis does.

  14. [...] but the fact remains that “stocks can only gain so much relative to earnings,” writes FusionIQ CEO Barry [...]

  15. [...] Ritholtz at The Big Picture notes that the performance of equities in this decade is not all that surprising given the strong [...]