A reader asks:
I’ve just come across your blog post from 2016, “Deconstructing 30-Year Stock Market Returns.” Thank you for that! It was just about exactly what I was looking for. I wonder if you have updated your finding since then? Also, have you run the analysis for other time periods? 10-year and 20-year rolling averages would also be interesting.
When Matthew McConaughey was on his book tour he told Jimmy Fallon one of the reasons he writes on a regular basis is to forget.
— The Tonight Show (@FallonTonight) December 15, 2021"I write things down to forget."
-@McConaughey explains the value of journaling and how it helped him write “Greenlights.” #FallonTonight pic.twitter.com/GIYzNNmMRK
I’ve been writing regularly for a long time now too and I definitely forgot about this one. In that post I looked at the rolling 30 year annual returns for the U.S. stock market.
One of my favorite topics to write about is long run returns so we might as well update some numbers to see how things look.
Here are the rolling 10 year returns going all the way back to 1926:
Even over decade-long time frames, there was plenty of volatility in returns.
The best 10 year annual return was 21.4% for the period ending towards the tail-end of 1959. That’s a total return of roughly 600%. As Mr. McConaughhey would say — alright, alright, alright.
The worst 10 year annual return was a loss of almost 5% per year ending in the summer of 1939. That was bad enough for a 10 year total return of -40%. The 1930s were a little rough.
The only other time the market experienced negative returns over 10 years was starting with the bursting of the dot-com at the start of the 2000s followed by the Great Financial Crisis hitting towards the end of that decade.
Over rolling 20 year periods we see the down returns make an exit but still plenty of variation:
The best 20 year annual return was more than 18% per year from the early-1980s through the spring of 2000 at the aforementioned dot-com bubble peak.
The worst 20 year return was a gain of less than 2% ending in 1949. This makes sense when you consider that period included the Great Depression and World War II.
One of the neat things about the distribution of returns over 20 years is almost 90% of the time annual returns were 7% or higher. Annual returns were 8% or more in 75% of all rolling 20 year observations. They were 10% or higher 56% of the time.
Now for one of my favorite long-run charts — rolling 30 year annual returns:
The lowest annual return over any 30 year period going back to 1926 was 7.8%. That’s what you got had you invested at the peak of the Roaring 20s boom in September 1929. You would have lost more than 80% of your investment in the ensuing crash and still made more than 850% in total over 30 years.
Allow me to repeat that stat for the people in the back — the worst 30 year return over the past 100 years or so was a total gain of 850%.1
The best 30 year annual return was 14.8% in the 30 years ending in 1968. This makes sense considering you would have been invested in 1939 following the worst 10 year stretch in history.
The most recent 10 year annual gain through January 2023 was 12.7%. The previous 20 years were up 10.3% per year. And the past 30 years were up 9.8% per year.
The most recent 30 year period since 1993 includes:
The Asian currency crisis, the dot-com crash, 9/11, the Iraq/Afghanistan wars, the Great Financial Crisis, the biggest global pandemic since 1918, the war in Ukraine and 9% inflation not to mention flash crashes, a few recessions, government shutdowns, trade wars, an insurrection, multiple impeachment hearings, 4 legitimate bear market crashes, 9 other stock market corrections and a whole bunch of other crazy and/or bad things I can’t think of right now.
I don’t know if we can have a repeat performance over the next 30 or 100 years.
Here’s what I wrote in my original blog post back in 2016:
We are promised nothing as investors in terms of future returns. Things could certainly be worse from this point forward. You just never know.
Still, it’s hard to look at these numbers and not be optimistic about the future. Bad things happen and human progress continues to march on.
I still believe this to be true.
Bet against human progress at your own peril.
We talked about this question on the latest edition of Portfolio Rescue:
Bill Sweet joined me once again to discuss bonds, Roth IRAs, RMDs, tax policy BBQ ribs and much more.
Further Reading:
Deconstructing 30 Year Stock Market Returns
1The usual caveats apply here — no taxes, fees, inflation or transaction expenses. Still.
As an enthusiast with a deep understanding of long-term stock market returns and financial analysis, I appreciate the reader's interest in revisiting the topic discussed in the blog post from 2016, titled "Deconstructing 30-Year Stock Market Returns." I'm glad to provide updated insights and additional analysis based on the information presented.
To address the reader's inquiry, the author has indeed revisited the topic and extended the analysis to include 10-year and 20-year rolling averages. This allows for a more comprehensive understanding of the historical performance of the U.S. stock market over different time frames.
The analysis begins by examining the rolling 10-year returns dating back to 1926, revealing notable volatility in returns even over relatively short periods. The best 10-year annual return occurred in the late 1950s, with a remarkable 21.4% return, while the worst was a loss of nearly 5% per year in the late 1930s. The early 2000s, marked by the dot-com bubble burst and the Great Financial Crisis, also saw negative 10-year returns.
Moving on to 20-year rolling periods, the analysis shows a reduction in down returns, but still observes considerable variation. The best 20-year annual return was over 18%, coinciding with the dot-com bubble peak in the early 2000s, while the worst was a gain of less than 2% in the late 1940s, encompassing the Great Depression and World War II.
The focus then shifts to the rolling 30-year annual returns, a preferred topic for the author. Notably, the lowest annual return over any 30-year period since 1926 was 7.8%, stemming from the crash following the Roaring 20s boom. Despite this, the total gain over 30 years was still an impressive 850%. The best 30-year annual return was 14.8%, ending in 1968, following the worst 10-year stretch in history.
Providing contemporary data, the author mentions that the most recent 10-year annual gain through January 2023 was 12.7%, with the previous 20 years up 10.3% per year and the past 30 years up 9.8% per year. This period includes significant global events such as the Asian currency crisis, dot-com crash, 9/11, wars, the Great Financial Crisis, the COVID-19 pandemic, and various other challenges.
The author concludes by reiterating the unpredictability of future returns, acknowledging the occurrence of adverse events but expressing optimism about the future. The sentiment is rooted in the historical resilience of the market despite crises and the ongoing march of human progress.
In summary, the analysis covers rolling returns over 10, 20, and 30-year periods, highlighting historical volatility, significant events, and the overall resilience and optimism that characterizes long-term stock market performance.
