A reader asks:
Last year I was increasing my net worth and I found it very interesting. I asked AI if the S&P 500’s 30.6% return last year was one of the biggest returns. It probably wasn’t #7 or #8. Either way, the air here has thinned and looking at the earnings reports all points are that we are not at the top. What does your data say?
Lately I’ve been getting a lot of questions from people asking me to check the work done by an AI model.
I guess it’s good news that I haven’t been replaced by robots yet.
I love a good research project on market history like this one.
Since I like round numbers, let’s take the data back to 1975.
From the beginning of 1975 to the end of April, the S&P 500 gained 12.5% per year.
This is really good.
How good you may ask?
Ten thousand dollars invested in the S&P 500 at the beginning of 1975 was worth $4.2. million Today. The compound is surprising.
Now let’s look at the one-year returns in question.
I calculated the 12-month total returns for the S&P 500 going back to 1975. In fact, the stock market was up 31% last year.
But that wasn’t even close to the best one-year return in the last 50 years:
The best 12-month return was the 61% gain that occurred in the early 1980s.
This ushered in the beginning of an epic bull market that emerged from back-to-back recessions. Paul Volcker and the company will eventually eliminate sky-high inflation.
The worst 12-month return was the 43 percent loss experienced during the Great Financial Crisis.
The trailing 12-month return of 31% ranks in the 88th percentile of one-year returns since 1975. Here is the sequential distribution of one-year returns since 1975:
That’s a pretty good return.
Returns of 40% or more occurred 22 different times. The index increased by 50% or more 7 times in a 12-month period.
The stock market is down 17% of 12-month returns. It had double-digit losses 8% of the time, and only 3% of one-year returns were down 20% or more.
The real question here is what will happen to the stock market? after A big year like the one we just had.
I looked at average 12-month returns following a gain of 30% or more in the previous 12 months. It was 11.1 percent.
So it’s hard to say.
All AI earnings growth can be priced. Maybe this a meltdown There is still something to run.
It is almost impossible to predict the stock market over a 12-month period because the range of returns can vary so widely.
We tackled this question on Ask the Compound, broadcast live from New York:
Bill Sweet We’re back on the show this week to tackle questions about why stocks are rising, how excise taxes work, foreign tax credits, how to save for college, retirement planning for small business owners, and how to sell low-cost core stocks.
Further Reading:
31 Year Stock Exchange Return
This content containing security-related opinions and/or information is for informational purposes only and should in no way be relied upon as professional advice or endorsement of any practice, product or service. No guarantee or warranty can be given that the views expressed herein will apply to any particular case or circumstance and should not be relied upon in any way. You should consult your own advisors on legal, business, tax and other related matters regarding any investment.
The comments contained in this “post” (including any associated blogs, podcasts, videos, and social media) reflect the personal opinions, perspectives, and analyzes of Ritholtz Wealth Management employees making such comments and should not be considered the opinions of Ritholtz Wealth Management LLC. or its respective affiliates or a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.
References to any security or digital asset or performance data are for illustrative purposes only and do not constitute investment advice or an offer to provide investment advisory services. The tables and graphs contained therein are for informational purposes only and should not be taken into account when making any investment decisions. Past performance is not indicative of future results. The content speaks only from the date specified. Any projections, estimates, estimates, targets, expectations and/or opinions expressed in these materials are subject to change without notice and may differ from or contradict views expressed by others.
The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives compensation from various organizations for advertising on affiliate podcasts, blogs and emails. The inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or Ritholtz Wealth Management or any of their employees. Investments in securities involve the risk of loss. For additional advertising disclaimers, see here: https://www.ritholtzwealth.com/advertising-disclaimers
Please see the descriptions Here.
