Stocks in the U.S. have marched higher for more than six years now, making this one of the longest “bull markets” in history.
Such a great run for U.S shares has whipped the media frenzy into high gear. Daily headline stories tell us how much the S&P 500 Index has risen since its 2009 low (+215%), how many calendar days have passed since the last 10% “correction” (1,332) or how many months the typical bull market has lasted (31).
More often than not, these statistics are used by market pundits to explain why the good times are set to end—with stock prices headed for a fall.
Rather than succumb to the media hype, let’s put the performance of the past six plus years in perspective:
Without question, U.S. stock returns have been stellar, as the table below shows. We shouldn’t expect this level of per-year performance to continue.
This does not imply, however, returns will—or should—turn negative. Rather than “ending badly” as some are predicting, couldn’t the recent run of great performance be investors’ just reward? In other words, returns of the past six years may simply be fair compensation for the risk paid over the (nearly) four previous years.
Looking at these two adjacent periods—one a dramatic bear market, one a welcome bull market—as one full 10-year stretch, returns actually look quite normal relative to those of the past 89 years. One could even argue they are a little low:
While headlines will continue to offer predictions of how stocks will perform, it is important to remember no one knows for certain what the market will do tomorrow, next quarter or next year.
Let’s enjoy the returns we’ve earned recently and appropriately frame our expectations for the future. Above all, we can be confident a well-diversified and regularly-rebalanced portfolio remains the best way to protect and grow wealth—regardless of what markets have in store.
Source: Center for Research in Security Prices (CRSP) data: U.S. Large Cap = CRSP 1-2 Index; U.S. Mid Cap = CRSP 3-5 Index; U.S. Small Cap = CRSP 6-10 Index.
