State of the Market: “A Permanently High Plateau”?

A brilliant economist, Irving Fisher, is, unfortunately, best known for one of the worst stock predictions of all time.

On October 16, 1929 in a New York Times article Mr. Fisher was quoted, “Stock prices have reached what looks like a permanently high plateau…” after the Dow Jones Industrial Average increased six-fold over the preceding eight years during the Roaring Twenties.

Over the next month, the Dow lost almost half its value causing Mr. Fisher to go broke. The Dow ultimately went on to lose 89% of its value from its peak in late-1929 to its bottom in the summer of 1932. Continue reading “State of the Market: “A Permanently High Plateau”?”

Best and Worst 12-Year Investment Periods Throughout History

“Those who cannot remember the past are condemned to repeat it.”

With that in mind, let’s review the past so that we might catch a glimpse into the future.

The three best 12-year annualized forward returns for the S&P 500 (including dividends) going back to 1928 were:

  • 19.0% (1988-2000)
  • 18.3% (1950-1962)
  • 18.2% (1944-1956)

An annualized return of 19% implies a $100,000 portfolio grows to over $805,000 in twelve years!

The three worst 12-year annualized forward returns were:

  • -2.8% (1930-1942)
  • -2.4% (1929-1941)
  • 0.5% (2000-2012)

An annualized loss of 2.8% implies a $100,000 portfolio declines to about $71,000 in twelve years.

For context, the very long-term annualized return for the S&P 500 is around 10%. So we observe there is tremendous amount of volatility in even 12-year periods. Continue reading “Best and Worst 12-Year Investment Periods Throughout History”

2-Year Anniversary of the Stock Market Peak

Yesterday’s close marked the 2-year anniversary of the global stock market peak. The global stock market has now gone two years without making a new all-time high and is down over 9% since November 8, 2021.

The last time the global stock market was down for two years following an all-time high was during the Great Financial Crisis (November 2007 to November 2009). Continue reading “2-Year Anniversary of the Stock Market Peak”

Meme Stocks, Bored Monkey Pictures, Digital Pokémon

“The real problem is that a decade of experimental distortion encouraged unprecedented speculation in every conventional asset class, not to mention fringe speculation in assets detached from any standard of value, including meme stocks, pictures of bored monkeys, and digital Pokémon posing as ‘currency.’ As with every similar episode across history, the unwinding of this bubble in the form of financial crisis is already quietly baked in the cake.”

– Dr. John Hussman, “Central Bankers Wandering in the Woods” September 2023

Today we update Treasury bond and U.S. stock market forward return estimates.

Treasury bond return estimates are very easy. It’s simply the current yield offered by the bonds… assuming the U.S. government doesn’t default of course. Here are the current annualized yields for various maturities: Continue reading “Meme Stocks, Bored Monkey Pictures, Digital Pokémon”

Average Retail Investors Down Over 35% in 2022

Executive Summary

  1. Retail investors were down over 35% on average in 2022 as they chased into overvalued and speculative assets that did well in prior periods.
  2. 2022 was generally difficult for even conservative and balanced portfolios.
  3. Wall Street insists on performing the fool’s errand of making12-month return forecasts and got it very wrong in 2022.
  4. 12-year outlook for stocks and bonds.

Continue reading “Average Retail Investors Down Over 35% in 2022”