This morning we are talking about the stock market again. What’s on tap today?
Saturday marked a big day. On March 9, the current stock market run turned 10. Ten years ago in March of 2009, the financial crisis and the resulting Great Recession were in full swing. The financial system was destabilized, the economy was shedding over 700,000 jobs every month, and the stock market route had seen nearly $13 trillion in wealth erased. Now, a decade later, we are marking incredible stock market gains and broken records, and an economy that has been stable and strong over the course of that period.
That really is amazing to think about it being 10 years. How does it compare to other bull runs?
As you know, the current bull market is the longest in history, and continues to get longer by the day. But there are other noteworthy facts about the current period of stock market growth. Perhaps most importantly, over the last ten years the stock market has generated more than $30 trillion in wealth. Adjusted for inflation, this is the greatest amount of value created by any bull run in history, edging out the $25 trillion in gains made between December 1987 to March 2000. And the market has averaged 17.6 percent annualized returns year since it hit bottom in 2009, compared with a historical average of about 10 percent, according to S&P Dow Jones Indices. Taken together, it is easy to see just how phenomenal that past decade has been for investors.
What has been spurring this bull market on?
The reason this market run has lasted this long is because it emerged from the ashes of the Great Recession and the financial crisis. The economy and the financial system took such a large hit a decade ago, and it has resulted in a recovery that has been more gradual and more prolonged. More recently, there have been a few key factors that have continued to drive economic growth. First, consumer confidence and strong job creation have meant Americans consumers are opening their wallets and spending money. This has underpinned the strong economy and contributed to very healthy corporate earnings and balance sheets. Lower corporate tax rates and deregulation have also played a role. And while some issues have raised eyebrows in recent months – the government shutdown, the ongoing trade tensions with China, and perception that the economy may be shifting into a lower gear in the coming year – investors have continued to demonstrate confidence in the economy’s fundamentals, which has kept the market’s positive streak going.
Who have been the main beneficiaries of this run?
Since March of 2009, the market has been good to anyone who has held stocks. Individual investors are the biggest source of money in the stock market, and they have benefitted mightily. The S&P 500 has more than quadrupled from its nadir of 666 in March 2009. The Dow has surged nearly 19,000 points, just below 300%. And the Nasdaq has shot up 500%. As I mentioned, average annualized returns have outperformed the historical average by over 70 percent over the past decade. Whether it is through personal stock holdings, pension accounts, 401k or other retirement accounts, or college saving programs, the last 10 years have been great for stockholders. But remember, in order to have seen the benefits of the market tear, you had to hold stocks! And in the wake of the Great Recession, many Americans shied away from them out of fear, and they have missed out.
It is easy to get anxious again about a downturn after 10 years. What should our listeners keep in mind at this stage?
There are two key things our listeners should keep in mind. First, remember you should never try to time the market. I have said it before, but it warrants repeating: no one can predict the stock market. No matter what your neighbor tells you, or what they are hyping on late night infomercials, you want to ride out the storm. Those who stuck through the tough years of 2008 and 2009 have reaped the benefits a decade later, but many people will get burned trying to predict market ups and downs. Second, remember you are investing for the long term. If you contribute money to your 401k or other investments accounts every month, this will help you to take the emotion out of the process, and prevent you from doing something you may come to regret later.