The stock market is one of the greatest wealth creators ever invented. And with the introduction of investment accounts with low fees and index fundsIt has never been so easy invest in the stock market.
Many investors will look to history to see what kind of returns they could expect in the future. And for all the volatility in stocks, they have proven to be remarkably consistent for long-term buy-and-hold investors. Stocks can go up one year and down the next, but over the long term they have always managed to increase in value.
The last 15 years have been one of the strongest 15-year streaks in history. Investors may be wondering whether the strong returns of the last decade and a half are here to stay or whether we can expect more moderate returns in the future. To understand whether the average stock market returns over the past 15 years are repeatable, it's important to look at history.
Here's the average stock market return over the last 15 years
The last 15 years begins in early 2009. The market was coming off a massive stock decline that began in October 2007, fueled by the global financial crisis, which led to the Great Recession. That bear market finally saw the S&P 500 (SNPINDEX: ^GSPC) it decreased 57% from its peak, reaching its lowest point in March 2009.
The following decade saw exceptional returns for the benchmark index. That's how the last 15 years were.
|
Year |
Annual return of the S&P 500 |
|---|---|
|
2009 |
25.94% |
|
2010 |
14.82% |
|
2011 |
2.10% |
|
2012 |
15.89% |
|
2013 |
32.15% |
|
2014 |
13.52% |
|
2015 |
1.38% |
|
2016 |
11.77% |
|
2017 |
21.61% |
|
2018 |
(4.23%) |
|
2019 |
31.21% |
|
2020 |
18.02% |
|
2021 |
28.47% |
|
2022 |
(18.04%) |
|
2023 |
26.06% |
Data source: Aswath Damodaran of NYU Stern.
It took another decade after 2008 before the market produced a negative annual total return, declining slightly in 2018. The market didn't experience another big drop until the COVID-19 pandemic hit in 2020, but stocks recovered exceptionally quickly from the bear market. when the Federal Reserve and the federal government intervened to boost the economy. The stock market did not have a significant down year until it entered a bear market in 2022.
Overall, the S&P 500 grew at a compound annual growth rate of 13.8% over the past 15 years. Adjusting for inflation, the index grew 11.2% annually during that period.
But if we go back this period just one year, which reduces the strong 2023 yield and includes the terrible bear market of 2008, the 15-year yield works out to just 8.7%, or 6.4% adjusted for inflation. . What a difference certain years can make!
What can investors expect in 2024 and beyond?
The last 15 years have been a very strong run for the stock market, and while the results are above average, they are unprecedented.
Investors who bought into the stock market after the United States entered World War II enjoyed very strong returns over the next 15 years, even after accounting for inflationary challenges immediately after the war. Likewise, anyone lucky enough to start investing in the 1980s, amid high interest rates and an ongoing battle against inflation, would be well positioned to take advantage of the rising stock prices of the late 1990s. .
On the other side of the coin, investors who did not enter the market until the 1960s experienced relatively poor returns hampered by high inflation that lasted well beyond the 1970s. Likewise, someone who invested in the late 1970s In the 1990s, amid stock market euphoria, it was hit by the bursting of the dot-com bubble and the Great Recession.
There is no predicting what the next 15 years will bring. Historically, the S&P 500 has outperformed inflation by about 6.5% annually. But as the last 15 years demonstrate, stocks can deviate quite a bit from their averages in any given year and even any given 15-year period.
However, investors must remain confident that stocks will continue to outperform inflation over the long term and ultimately produce wealth for those who are patient.
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Adam Levy has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Here's the average stock market return over the last 15 years was originally published by The Motley Fool
