Market coming up on 2 years of flat.

[audreyh1]

See original post - I didn't pick a certain date, but rather when the SP500 first crossed the 2000 level.

It was first hit almost 2 years ago ( in July 2014) and here we are 2 years later pretty much at that same 2000 level.

Yes saw an up leg to 2131 and a down leg to around 1850 but it's been within that band now for 2 years now... And we've not seen a new market high in a year...

The bull usually ends with a whimper. I think we're whimpering ....

The bull usually ends with a whimper? Didn't happen that way in 2000 or 2008. Sometimes there are flattish periods.

 

[mathjak107]

Is that the geometric or arithmetic average inflation adjusted return ?

Cagr

 

[marko]

Our net worth hit a peak exactly a year ago. So for us, it seems like it's only been flat (to down) for a year, not two.

Me too. May 21st to be exact.

Well, IMO, the S&P500 really got ahead of itself in 2013, so we've spent the following years trying to digest the overindulgence.......

I look at the 20-50 year trend and view it as the tide; there will be things like sand castles and little walls that will hold back that tide for a bit but over time, the tide will win out.

If the tide came up too fast, it needs to reestablish its positive equilibrium.

Having said that, I still believe there's billions/trillions sitting on the sidelines since 2008.

 

[Lsbcal]

on an inflation adjusted basis the s&p 500 has averaged about 1.83% the last 15 years . one dollar is 1.34 adjusted for inflation .

You probably left out dividends. The number I have with dividends is 3.4% (May 2001 through April 2016).

For 20 years, this goes up to 5.6% after inflation.
For 25 years, this goes up to 6.8% after inflation.

 

[mathjak107]

I went from jan 2000 to dec2015 since those are the last completed years. The 1.83% real return is with dividends.

That means any older money you had accumulated up until 2000 basically hit a wall. New money did fine but if you had a sizeable balance and went to sleep for 15 years and woke up you would be like what the heck.

 

[Gone4Good]

I went from jan 2000 to dec2015 since those are the last completed years. The 1.83% real return is with dividends.

And if you bring that forward from 2000 until May 2016 your average annual return over the past 16.5 years bumps up to 2.0% real with dividends reinvested.

The good news is that valuations on the S&P 500 have dropped from 44x to 26x over that time period. So instead of being ridiculously overvalued we're now just overvalued.

 

[Lsbcal]

I went from jan 2000 to dec2015 since those are the last completed years. The 1.83% real return is with dividends.

That means any older money you had accumulated up until 2000 basically hit a wall. New money did fine but if you had a sizeable balance and went to sleep for 15 years and woke up you would be like what the heck.

OK, my numbers agree with yours for that period.

But to get a decent picture of returns, shouldn't we look at rolling period returns? M* will do that but the longest period is 5 years. Here is the 5 year rolling returns chart for the SP500 fund (VFINX). The last bar is fro the period May 2011 through April 2016. You can easily see the 2 bear market periods:

 

[NW-Bound]

...The good news is that valuations on the S&P 500 have dropped from 44x to 26x over that time period. So instead of being ridiculously overvalued we're now just overvalued.

And how much the S&P needs to drop until it becomes fairly valued?

 

[Fedup]

I've heard it's around 16. But in 2009, it was outrageous, like 120-70, yet it was time to buy. Is this a reliable signal? I wonder.

 

[mathjak107]

OK, my numbers agree with yours for that period.

But to get a decent picture of returns, shouldn't we look at rolling period returns? M* will do that but the longest period is 5 years. Here is the 5 year rolling returns chart for the SP500 fund (VFINX). The last bar is fro the period May 2011 through April 2016. You can easily see the 2 bear market periods:

everyones numbers are unique to them because of the amount of money they have at any point and the time frames leading in and out matter a lot.

As an example if we look at the 17 years from 1987 to 2003 markets had an amazing almost 14% cagr return .

That was great ,except the time frame leading in was horrible. Most of us could save nothing , 401k's were not even around yet . So here come the greatest bull in history but we have very little money accumulated yet to work for us.

On the other hand today a 7% drop which is small represents 9 years of maxing out my 401k at catchup.

So just looking at cherry picked time frames means little as do average returns on funds since we all add money at different times , buy in differently , rebalance at different points , etc.

 

[NW-Bound]

I've heard it's around 16. But in 2009, it was outrageous, like 120-70, yet it was time to buy. Is this a reliable signal? I wonder.

In the middle of the Great Recession, P/E temporarily went to hell because there was no E.

Hence, the idea of PE10 to average out the extreme swings.

 

[audreyh1]

I went from jan 2000 to dec2015 since those are the last completed years. The 1.83% real return is with dividends.

That means any older money you had accumulated up until 2000 basically hit a wall. New money did fine but if you had a sizeable balance and went to sleep for 15 years and woke up you would be like what the heck.

That may be for the S&P500, but our net worth from Jan to dec 2015 is up 15% after inflation, taxes and all spending. So it depends on how you were invested (and how much you spent).

It was up over 26% in April 2015, and so gave some back over the rest of the year.

In general, if our net worth after taxes and spending still breaks even with inflation I feel like we're doing great.

 

[mathjak107]

Net worth increasing from adding new money or cutting spending does not change the dismal performance money in equity's saw that was existing pre 2000. Thankfully i did well in real estate after 2000 so i saw decent growth on new money put in the markets.

but money in equity's i already had invested was pretty below average

 

[Fedup]

That may be for the S&P500, but our net worth from Jan to dec 2015 is up 15% after inflation, taxes and all spending. So it depends on how you were invested (and how much you spent).

It was up over 26% in April 2015, and so gave some back over the rest of the year.

In general, if our net worth after taxes and spending still breaks even with inflation I feel like we're doing great.

I think if I remember correctly, you invest 35% in emerging market. Emerging market did well this year.

 

[Gone4Good]

I've heard it's around 16. But in 2009, it was outrageous, like 120-70, yet it was time to buy. Is this a reliable signal? I wonder.

I think what you mean is that a PE based on trailing earnings spiked in 2009 because earnings collapsed. CAPE meanwhile fell to around 11x in March 2009 and some of us said at the time that future returns would be higher as a result.

Now those excess future returns have been realized and it's payback time again.

 

[cyber888]

up 15% .. nice. what did you invest in ?

That may be for the S&P500, but our net worth from Jan to dec 2015 is up 15% after inflation, taxes and all spending. So it depends on how you were invested (and how much you spent).

It was up over 26% in April 2015, and so gave some back over the rest of the year.

In general, if our net worth after taxes and spending still breaks even with inflation I feel like we're doing great.

 

[ulrichw]

[...]any older money you had accumulated up until 2000 basically hit a wall. New money did fine but if you had a sizeable balance and went to sleep for 15 years and woke up you would be like what the heck.

I think this is technically correct but doesn't really tell the full story.

It just so happens that Jan 2000 was a rather pronounced local maximum for the stock market.

Yes, if you measure from that point, returns look dismal, but what if you had gone to sleep in Jul of '02, when the S&P was close to 800? Or what if you fell asleep three years earlier when the S&P also was around 800? The run-up in the tail end of the dot com boom is part of what created that local maximum and needs to be taken into account when considering the return of your "old money".

It's easy to pick points in time to make any story, and I think you said the right thing in another post - it's the individual case that matters and when money gets put into the market.

Ultimately there's a fair amount of guesswork involved in what the actual long-term rate will be - and the idea that this return is constant (even when looked at over 30+ year timeframes) is almost certainly also an oversimplification.

 

[audreyh1]

Net worth increasing from adding new money or cutting spending does not change the dismal performance money in equity's saw that was existing pre 2000. Thankfully i did well in real estate after 2000 so i saw decent growth on new money put in the markets.

but money in equity's i already had invested was pretty below average

1999 was when I retired, so I often use Jan 1 2000 net worth as the "are we sinking or sailing" benchmark - and IMO it's a really tough one. If I look at August 1999 when I actually retired, the numbers are a good bit better. Given all the concerns about 1999 and 2000 retirees, I am encouraged to see that we are still beating inflation even though we haven't earned any wages since 1999.

Given that our allocation was not 100% equities going in, and that we rebalanced (buying more equities) during down market times, we don't feel bad about the money invested in equities during the period. We were far more broadly diversified than the S&P500.

 

[audreyh1]

up 15% .. nice. what did you invest in ?

A whole bunch of different stuff.

What looks like "only" 15% real is 56% nominal, AND 16 years of taxes and living expenses were paid out of that net worth. So we feel pretty good about it in general.

 

[audreyh1]

I think if I remember correctly, you invest 35% in emerging market. Emerging market did well this year.

No - not me. I have 0% invested in emerging markets, and my portfolio is more or less flat this year (so far).

 

[Fedup]

I certain wish I had discovered ER back in 2009. I was thinking of buying when the Dow was 6000 plus, but my husband talked me out of it because Cramer said it was going to go down to 4000. I at least should take a nibble. My screen name would be RichEnough.

 

[NW-Bound]

I think if I remember correctly, you invest 35% in emerging market. Emerging market did well this year.

EM was lousy the first two months of the year, same as the S&P. Then, it bounced back stronger than the S&P, up till mid April. Now it has given it all back, and ends up flat YTD, same as the S&P. All that down, then up, then down. Going nowhere.

The sectors still doing well YTD are natural resources, basic materials, and energy.

 

[Gone4Good]

I certain wish I had discovered ER back in 2009. I was thinking of buying when the Dow was 6000 plus, but my husband talked me out of it because Cramer said it was going to go down to 4000. I at least should take a nibble. My screen name would be RichEnough.

You'd have found plenty of folks pooping the sheets here just like everywhere else in 2009.

Following forums like this through multiple market cycles provides a front row seat to mass-investor sentiment. After long bull runs the optimists come out and you see plenty of articles about 100% equity allocations and various leveraging strategies to goose returns. Then when stocks cool you get posts like this one. When stocks fall you see people running for the hills.

 

[mathjak107]

I think this is technically correct but doesn't really tell the full story.

It just so happens that Jan 2000 was a rather pronounced local maximum for the stock market.

Yes, if you measure from that point, returns look dismal, but what if you had gone to sleep in Jul of '02, when the S&P was close to 800? Or what if you fell asleep three years earlier when the S&P also was around 800? The run-up in the tail end of the dot com boom is part of what created that local maximum and needs to be taken into account when considering the return of your "old money".

It's easy to pick points in time to make any story, and I think you said the right thing in another post - it's the individual case that matters and when money gets put into the market.

Ultimately there's a fair amount of guesswork involved in what the actual long-term rate will be - and the idea that this return is constant (even when looked at over 30+ year timeframes) is almost certainly also an oversimplification.

which is why i said that you can't judge things hypothetically for all the reasons i listed above . the only time frames that matter are your own .

since i did not have much money invested in the 1980's the great bull did not help me much .

whatever i did manage to accumulate hit a wall in 2000 . the newer money did just fine . today with full fuel tanks i am in my 2nd retirement year and things have been dismal since retiring . .

it is so far the last 2 years that count the most for me .

i was never one to watch random time frames since it really meant little to me .

 

[cyber888]

A whole bunch of different stuff ? Can you give a specific Fund, Stock, Bonds, etc ? Thanks.

A whole bunch of different stuff.

What looks like "only" 15% real is 56% nominal, AND 16 years of taxes and living expenses were paid out of that net worth. So we feel pretty good about it in general.