You
just doubled your money if you invested at the peak of a bull market
If you
bought the S&P 500 at this time 10 years ago, you watched more than half
your investment erased. You heard buy-and-hold pronounced dead and watched
fellow investors pull $200 billion from equities.
You
also doubled your money
Or just
about, anyway. Using a version of the S&P 500 that reinvests dividends, the
index has now pushed its gain since its Oct. 9, 2007, top to 98 per cent. Down
55 per cent at the market low in March 2009, the benchmark gauge has made all
that back plus a lot more, posting annualized gains of more than 7 per cent for
a decade
“It was
in the early 2000s and again 2008, where a lot of market pundits came out and
said, ‘that’s the end of 10 per cent a year for stocks,”’ said Rich Weiss,
chief investment officer and senior portfolio manager of multi-asset strategies
at American Century Investments. “Stocks have done what they almost always have
done and proved yet again that even with the 2008 disaster, they return 7, 8
per cent a year annualized. That’s intact. Hallelujah.”
For
investors wondering whether it’s time to sell as voices of caution get louder
by the day, the data is one persuasive argument against. Stocks have a tendency
to go up, thanks to corporate America’s efforts to boost profits. Right now,
analysts expect S&P 500 earnings to grow more than 10 per cent a year
through at least 2019.
Sure,
hanging in there during the 2008 financial crisis was pain that no investor
cherished. But sticking it out meant recouping all your losses in 2013 and
reaping bigger gains since. It’s been a fact of life in markets that virtually
every bull market in American stocks has ended at a higher point than the
previous one, with the S&P 500 peaking at levels that are on average 68 per
cent higher than the prior cycle top.
In other words, even if today marked the end of this
bull market, one could expect reasonable returns if the investment horizon is
long enough.
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