20 Years for SP500 to Recover

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CraigTester
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20 Years for SP500 to Recover

Post by CraigTester »

I continue to see numerous misleading/misinformed claims throughout this forum, like:

"The SP500 recovered in several years after the great depression", or the "SP500 has always recovered in just a few years, stay the course, etc…"

And while these claims can sometimes be tortured to be sort of true (for an interim moment), they can be extremely misleading or sometimes just plain wrong.

And most importantly, they can perhaps lead some unsuspecting Bogleheads to sign up for more risk than they had intended/understood with their AA, etc...


So…, Rather than derail other threads when these types of claims are made, I thought it would be helpful to everyone to have the facts nailed down.

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)

So I invite all the number crunchers out there to vet this data, argue about rounding error, cherry picking, etc....

But once we all agree on the math, perhaps we can add some version of this to the basic body of knowledge that all Bogleheads understand as they make their AA decisions, rebalancing schedules, lump sum decisions, etc.

All the best,

Craig Tester
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burritoLover
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

Do your numbers account for deflation?
homebuyer6426
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Re: 20 Years for SP500 to Recover

Post by homebuyer6426 »

I found the numbers look much better for the investor if one looks at the realistic accumulation over an entire career, then the realistic decumulation in retirement. Almost nobody invests a lump sum and then spends it all 20 years later.

For example, investing just $10,000 yearly from 1999 until now, you end up with a million. And you wouldn't spend that million all at once, so that would increase your buffer even more.
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Silverado
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Re: 20 Years for SP500 to Recover

Post by Silverado »

homebuyer6426 wrote: Tue Aug 09, 2022 2:07 pm I found the numbers look much better for the investor if one looks at the realistic accumulation over an entire career, then the realistic decumulation in retirement. Almost nobody invests a lump sum and then spends it all 20 years later.

For example, investing just $10,000 yearly from 1999 until now, you end up with a million. And you wouldn't spend that million all at once, so that would increase your buffer even more.
I agree. The six figures we put into equities last year might take quite a few years to show a gain. But the six figures we put into equities prior to 2000 look pretty darn good right now. And I remain very confident that when we need to sell those equities bought last year, sometime in maybe the 2050s, they are also going to look pretty good.

So, the numbers taken in a vacuum don’t make much sense to me.
Marseille07
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Why should we account for deflation after a crash when we generally don't account for inflation during a bull market?
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Re: 20 Years for SP500 to Recover

Post by Firemenot »

I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if your point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
Last edited by Firemenot on Tue Aug 09, 2022 2:49 pm, edited 1 time in total.
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CraigTester
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
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burritoLover
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

Marseille07 wrote: Tue Aug 09, 2022 2:27 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Why should we account for deflation after a crash when we generally don't account for inflation during a bull market?
These are inflation adjusted numbers that are given - not by me.
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Re: 20 Years for SP500 to Recover

Post by alfaspider »

homebuyer6426 wrote: Tue Aug 09, 2022 2:07 pm I found the numbers look much better for the investor if one looks at the realistic accumulation over an entire career, then the realistic decumulation in retirement. Almost nobody invests a lump sum and then spends it all 20 years later.

For example, investing just $10,000 yearly from 1999 until now, you end up with a million. And you wouldn't spend that million all at once, so that would increase your buffer even more.
Exactly. Almost nobody lump sums in on the peak or trough. The blow off peaks and the deep valleys are just noise over the course of a long investing career. The question is whether an investor putting 20% of their income in an S&P 500 fund each year over a 40 year working career made a sufficient return for a very comfortable retirement. The answer has pretty much always been yes except in cases where the entire market was wiped out shortly before or during retirement (i.e. WWII Germany). In a complete disaster scenario, bonds won't save you either.

That said, I think bonds and other more conservative assets CAN be important for folks nearing and in retirement due to sequence of returns risk. People who are still decades out from retirement don't have to worry as much about sequence of returns risk.
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Re: 20 Years for SP500 to Recover

Post by ee_guy »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
A few notes. The SP500 as we know it did not exist until 1957. You could not as a retail investor, buy the SP500 until the 1970's when the Vanguard 500 Trust was available.

These dates are cherry picked for the absolute most terrible worst case scenario with inflation adjustment to paint a bleak but accurate picture. (I have high regards for Schiller)

Using January 1 as the start dates would show different recovery periods with $1M invested on Jan 1. The results are NOT inflation adjusted.

1/1/1968 - doesn't go down
1/1/1969 - 12/31/1971 $1,087,879 recovers in 3 years (no inflation adj) vs 15 years (different start month with inflation adj)
1/1/2000 - 12/31/2006 $ 1,081,474 recovers in 7 years vs 13 years
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
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Re: 20 Years for SP500 to Recover

Post by Marseille07 »

The data seems fine to me.

Maybe the only question mark is Mar 2000- Jan 2013 as I thought S&P renewed ATH in 2007 before crashing down in 2008. Maybe the CPI adjustments got in the way, but if nominal S&P renewed ATH then the clock should reset in my opinion.
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

Firemenot wrote: Tue Aug 09, 2022 2:33 pm I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if you’re point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
The time periods, as hopefully understood, are cherry picked. But nevertheless, they still happened.

So my point is simply to plan accordingly....
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Re: 20 Years for SP500 to Recover

Post by JackoC »

burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
The numbers per Shiller*, adjusted for CPI, synthetic S&P500 per his calcs before index officially existed. I'd emphasize the definition given by Craig Tester: second date is last time the (CPI adjusted) total return index surpassed the previous highwater mark. The CPI adjusted S&P TR index reached back to the Aug 1929 peak for example briefly in 1936-7 (at about 20% lower CPI than 1929) and for longer in 1945-46 (at about same as 1929's CPI) before 'permanently' exceeding it in 1949 (at around 38% higher CPI than 1929).

I believe I've also heard people say there was an interim breakeven only 4 yrs or so after the 1929 peak, can't point to a source, but I believe it should be discarded. If Shiller made that big a mistake I think we'd have heard of it, his numbers have gotten a fair amount of scrutiny.

*
http://www.econ.yale.edu/~shiller/data.htm
Column J of the spreadsheet seen by clicking "U.S. Stock Markets 1871-Present and CAPE Ratio"
Last edited by JackoC on Tue Aug 09, 2022 2:58 pm, edited 1 time in total.
sc9182
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Re: 20 Years for SP500 to Recover

Post by sc9182 »

.. and despite these cherry-picked market LULLs, market averages about 8% a year !? (over longer periods)

The UP-tide must be lot stronger than these downside data indicates ..
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

Marseille07 wrote: Tue Aug 09, 2022 2:50 pm The data seems fine to me.

Maybe the only question mark is Mar 2000- Jan 2013 as I thought S&P renewed ATH in 2007 before crashing down in 2008. Maybe the CPI adjustments got in the way, but if nominal S&P renewed ATH then the clock should reset in my opinion.
Thanks for vetting....

and yes, I've seen this time period debated before....but according to the Shiller monthly data, 2007 didn't quite retain the 2000 high water mark....(but maybe there was a day during the month when it did...)

But regardless, in 2007 we were only half way through the waiting period to "permanently" retain our 2000 levels...
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Re: 20 Years for SP500 to Recover

Post by Fireishere »

burritoLover wrote: Tue Aug 09, 2022 2:43 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
Check this: https://www.businessinsider.com/henry-b ... 2009-4?amp
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Re: 20 Years for SP500 to Recover

Post by alex_686 »

CraigTester wrote: Tue Aug 09, 2022 2:53 pm
Firemenot wrote: Tue Aug 09, 2022 2:33 pm I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if you’re point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
The time periods, as hopefully understood, are cherry picked. But nevertheless, they still happened.

So my point is simply to plan accordingly....
So to extend on this, lots of people think the stock market has some type of mean reversion principle. It does not. The market is pretty much a random walk. That the market was high last year and low this year does not contain much in the way of statically useful information.
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Re: 20 Years for SP500 to Recover

Post by JackoC »

Fireishere wrote: Tue Aug 09, 2022 3:05 pm
burritoLover wrote: Tue Aug 09, 2022 2:43 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
Check this: https://www.businessinsider.com/henry-b ... 2009-4?amp
Thanks for pinpointing that. I'd say two things:
1. Definition: Hulbert was looking at the first time the inflation adjusted total return index returned to the previous peak. Shiller himself isn't saying anything about recovery times but Craig Tester's examples based on Shiller's numbers are the time it took the inflation adjusted total return index to 'permanently' exceed the previous peak, IOW just after the last time (to date*) it was lower than the previous peak. Per Hulbert's definition the Shiller data says late 1936 as first time the inflation adjusted total return index reached back to Aug 1929 level.

2. On same definition basis I'd take Shiller over Hulbert, and all the numbers are online (see my previous post).

And a third thing... which should be obvious, a few non-overlapping periods are long as 20 yrs do not define everything that could happen, would not even under the assumption of some natural undeviating distribution of returns, itself an obviously doubtful assumption IMO. I take it as give stock returns could be negative real (especially including taxes) for at least 20 yrs. I would agree to disagree with those saying 'OK but it's *very* unlikely'. I don't know if it's very unlikely looking forward.

*we can't really take 'to date' as literally 'permanently' if we're talking about the year 2000 when the level was ~40% of now's, we surely hope 'to date' means pretty literally 'permanently' about the 1929 level which was ~0.5% of the current level
Last edited by JackoC on Tue Aug 09, 2022 3:22 pm, edited 1 time in total.
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Re: 20 Years for SP500 to Recover

Post by alluringreality »

Exhibit 6 at the top of Page 6 in the following from Goldman Sachs suggests their calculations indicates the periods beginning in 1929 and 1968 may be longer than indicated in the original post. Their real number of months to recovery appears to indicate additional years to those prior high points. The exhibit lists "Source: Robert Shiller, Datastream, Goldman Sachs Global Investment Research".
https://www.goldmansachs.com/insights/p ... ntials.pdf
Last edited by alluringreality on Tue Aug 09, 2022 3:27 pm, edited 1 time in total.
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Re: 20 Years for SP500 to Recover

Post by Firemenot »

JackoC wrote: Tue Aug 09, 2022 3:18 pm
Fireishere wrote: Tue Aug 09, 2022 3:05 pm
burritoLover wrote: Tue Aug 09, 2022 2:43 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
Check this: https://www.businessinsider.com/henry-b ... 2009-4?amp
Thanks for pinpointing that. I'd say two things:
1. Definition: Hulbert was looking at the first time the inflation adjusted total return index returned to the previous peak. Shiller himself isn't saying anything about recovery times but Craig Tester's examples based on Shiller's numbers are the time it took the inflation adjusted total return index to 'permanently' exceed the previous peak, IOW just after the last time (to date*) it was lower than the previous peak. Per Hulbert's definition the Shiller data says late 1936 as first time the inflation adjusted total return index reached back to Aug 1929 level.

2. On same definition basis I'd take Shiller over Hulbert, and all the numbers are online (see my previous post).

And a third thing... which should be obvious, a few non-overlapping periods are long as 20 yrs do not define everything that could happen, would not even under the assumption of some natural undeviating distribution of returns, itself an obviously doubtful assumption IMO. I take it as give stock returns could be negative real (especially including taxes) for at least 20 yrs. I would agree to disagree with those saying 'OK but it's *very* unlikely'. I don't know if it's very unlikely looking forward.

*we can't really take 'to date' as literally 'permanently' if we're talking about the year 2000 when the level was ~40% of now's, we surely hope 'to date' means pretty literally 'permanently' about the 1929 level which was ~0.5% of the current level
Following up on item 3, put me in the camp of I think it’s highly unlikely we have negative real growth on US stock indices over a 20-year period anytime soon. We still have a very dynamic business culture. Whole new industries will likely pop-up in the next 20 years, just like they did in the last 20. And never underestimate the ability of corporate managers with compensation packages tied to profits to grow profits.
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Re: 20 Years for SP500 to Recover

Post by Northern Flicker »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm I continue to see numerous misleading/misinformed claims throughout this forum, like:

"The SP500 recovered in several years after the great depression", or the "SP500 has always recovered in just a few years, stay the course, etc…"

And while these claims can sometimes be tortured to be sort of true (for an interim moment), they can be extremely misleading or sometimes just plain wrong.

And most importantly, they can perhaps lead some unsuspecting Bogleheads to sign up for more risk than they had intended/understood with their AA, etc...


So…, Rather than derail other threads when these types of claims are made, I thought it would be helpful to everyone to have the facts nailed down.

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
Correct, but the first two are something other than the S&P500, which was launched in 1957. The 3rd in the list is an argument for diversification of holding the total market and ex-US. US small caps exploded from 1977-1983, enough that a hypothetical total market index would have recovered before 1983. And ex-US DM stocks had healthy real returns in USD terms from 1967-1983.

The other 3 periods are an argument for not overdoing it with ex-US diversification.
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
You should really beg for those type of periods in accumulation (barring job loss) as DCAing there netted you incredible gains as the market took off from the end.
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Re: 20 Years for SP500 to Recover

Post by MarkRoulo »

burritoLover wrote: Tue Aug 09, 2022 2:43 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
I've seen the 4 1/2 year recovery for a broad-based diversified basket of stocks (not DOW) for the great depression mentioned in numerous places considering deflation. Don't know the methodology used there.
4 1/2 years to recover from a nominal 89% drop in stocks is going to be tough.

I expect that by
  • Picking a start date a little carefully (e.g. don't pick the peak in 1929, pick either Jan 1 or Dec 31 or Jan-1 1930)
  • Having some leeway about which stocks you pick, and
  • Not getting too hung up on exactly 4 1/2 years (maybe 5 years and a bit)
You can find a way to get this 4 1/2 year recovery for the Great Depression.

Some examples (none of which get us a 4 1/2 year recovery).
  • Aug 1929 - Feb 1934 has an inflation/deflation adjusted total return (so including dividends) of -35%. Not quite a recovery.
  • Aug 1929 - Feb 1937, however, has an inflation/deflation adjusted total return of +11% so we've recovered. This was close to a local top, however, and
  • Aug 1929 - Feb 1940 was back to an inflation/deflation adjusted total return of -11%
January 1930 - January 1936 shows an 11% inflation/deflation adjusted total return so we're getting close. This is six years. Maybe choosing a different series of stock returns will get your 4 1/2 year. I'm using data from here: https://dqydj.com/sp-500-return-calculator/

I'm sure there are other data sets.
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Re: 20 Years for SP500 to Recover

Post by chicagoan23 »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm
Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)

But once we all agree on the math, perhaps we can add some version of this to the basic body of knowledge that all Bogleheads understand as they make their AA decisions, rebalancing schedules, lump sum decisions, etc.
Can you also post the returns of cash and bonds, when adjusted for inflation? It is highly likely that a $100 bill will never again be worth what $100 cash is worth today. Would it be appropriate to label a post "Dollar Value Will Never Recover"?
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Re: 20 Years for SP500 to Recover

Post by MarkRoulo »

burritoLover wrote: Tue Aug 09, 2022 3:44 pm
20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
You should really beg for those type of periods in accumulation (barring job loss) as DCAing there netted you incredible gains as the market took off from the end.
I'll note that horrible stock markets often DO come with job loss so begging for this sort of economy may not be warranted.

I have never read any accounts from people who were young adults at the beginning of the great depression who were thankful about the wonderful investment opportunities during their accumulation years. Not even from the 75% of the population that was employed. Most of what I have read is must more negative towards what life was like during the 1930s.

And I now read a lot about unhappy millennials who graduated from college around 2000 and then got hit almost a decade later with the 2008 financial crisis. Lots of complaining about how tough they have it. Not so much gratitude about the wonderful investment opportunities even though most millennials have jobs.

I think it is too easy to miss the fact that stock market collapses often do not occur without problems in the economy so you can't just get the collapse without the economic issues. Much like "value" companies often have problems of one sort or another.
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Re: 20 Years for SP500 to Recover

Post by burritoLover »

MarkRoulo wrote: Tue Aug 09, 2022 3:59 pm
burritoLover wrote: Tue Aug 09, 2022 3:44 pm
20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
You should really beg for those type of periods in accumulation (barring job loss) as DCAing there netted you incredible gains as the market took off from the end.
I'll note that horrible stock markets often DO come with job loss so begging for this sort of economy may not be warranted.

I have never read any accounts from people who were young adults at the beginning of the great depression who were thankful about the wonderful investment opportunities during their accumulation years. Not even from the 75% of the population that was employed. Most of what I have read is must more negative towards what life was like during the 1930s.

And I now read a lot about unhappy millennials who graduated from college around 2000 and then got hit almost a decade later with the 2008 financial crisis. Lots of complaining about how tough they have it. Not so much gratitude about the wonderful investment opportunities even though most millennials have jobs.

I think it is too easy to miss the fact that stock market collapses often do not occur without problems in the economy so you can't just get the collapse without the economic issues. Much like "value" companies often have problems of one sort or another.
Most people live paycheck to paycheck so there's going to be a lot of stories about how bad things were - they aren't going to be investing then anyway because they were doing little to no investing during the good times. Presumably, most on here though, aren't doing that and have a decent emergency fund to weather some period of job loss. If you keep plugging away with periodic investments while you have job, even if you have some periods where you have to reduce those contributions, you will likely be rewarded, especially when it seems like equities are dead.
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Re: 20 Years for SP500 to Recover

Post by marcopolo »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm I continue to see numerous misleading/misinformed claims throughout this forum, like:

"The SP500 recovered in several years after the great depression", or the "SP500 has always recovered in just a few years, stay the course, etc…"

And while these claims can sometimes be tortured to be sort of true (for an interim moment), they can be extremely misleading or sometimes just plain wrong.

And most importantly, they can perhaps lead some unsuspecting Bogleheads to sign up for more risk than they had intended/understood with their AA, etc...


So…, Rather than derail other threads when these types of claims are made, I thought it would be helpful to everyone to have the facts nailed down.

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)

So I invite all the number crunchers out there to vet this data, argue about rounding error, cherry picking, etc....

But once we all agree on the math, perhaps we can add some version of this to the basic body of knowledge that all Bogleheads understand as they make their AA decisions, rebalancing schedules, lump sum decisions, etc.

All the best,

Craig Tester

I guess this is mildly interesting to someone who lump sums into the market at the absolute worst time during their investing life time. Are there any actual such people?

To balance this, we should have a similar chart that shows what happens when people pull all their money out of the market at an inopportune time "waiting for a better re-entry point". How many years did they have to wait?
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: 20 Years for SP500 to Recover

Post by dogagility »

CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
Dividends?

"Mark Hulbert, writing for "The New York Times," suggests that an investor could have fully recovered from the 1929 crash in four-and-one-half years. He bases his claim on the fact that deflation and inflation haven't been figured in to true stock values from the period, and the fact that dividends paid an average of 14 percent. In addition, he points out that the Dow is not the entire market, and that the broader market had some quick-recovery stocks in it."
Last edited by dogagility on Tue Aug 09, 2022 4:31 pm, edited 1 time in total.
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Re: 20 Years for SP500 to Recover

Post by 9-5 Suited »

marcopolo wrote: Tue Aug 09, 2022 4:17 pm I guess this is mildly interesting to someone who lump sums into the market at the absolute worst time during their investing life time. Are there any actual such people?

To balance this, we should have a similar chart that shows what happens when people pull all their money out of the market at an inopportune time "waiting for a better re-entry point". How many years did they have to wait?
It is somewhat useful for my own circumstances. Our liquid investment balance is roughly 30x our annual savings amount, so what happens to our portfolio has become more meaningful than how much we save in a given year (and we intend to retire in 5 years or so). In effect, based on the theory that you 'buy your portfolio every day', that makes such a 'lump sum' scenario hit closer to home.

We have a 65/35 allocation instead of an 80/20 allocation in part for reasons of mutual tolerance for volatility but also to accommodate for the possibility of the 10-20 year scenario mentioned in the OP. I have no illusions it couldn't happen again, and consider it worth knowing so I can be mentally (and financially) prepared for it.
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Re: 20 Years for SP500 to Recover

Post by marcopolo »

9-5 Suited wrote: Tue Aug 09, 2022 4:30 pm
marcopolo wrote: Tue Aug 09, 2022 4:17 pm I guess this is mildly interesting to someone who lump sums into the market at the absolute worst time during their investing life time. Are there any actual such people?

To balance this, we should have a similar chart that shows what happens when people pull all their money out of the market at an inopportune time "waiting for a better re-entry point". How many years did they have to wait?
It is somewhat useful for my own circumstances. Our liquid investment balance is roughly 30x our annual savings amount, so what happens to our portfolio has become more meaningful than how much we save in a given year (and we intend to retire in 5 years or so). In effect, based on the theory that you 'buy your portfolio every day', that makes such a 'lump sum' scenario hit closer to home.

We have a 65/35 allocation instead of an 80/20 allocation in part for reasons of mutual tolerance for volatility but also to accommodate for the possibility of the 10-20 year scenario mentioned in the OP. I have no illusions it couldn't happen again, and consider it worth knowing so I can be mentally (and financially) prepared for it.
The "buy your portfolio everyday" is a nice theoretic construct. But, I have 7 figure capital gains in my taxable account from many years of steady investing. Not, a great idea for many like me.

if the message is to have a balanced portfolio, I am in total agreement. But, the OP believes he/she can tell where markets are headed, and has been out of the market for quite sometime waiting for a better re-entry point.

I tend to believe the notion that "more money has been lost waiting for recessions than in actual recessions". I actually don't know if that is true. But, given that the historical return of markets include all those recessions, I can certainly see logical steps to take based on that. Unless of course, one has discovered the secret decoder ring that most of the rest of the world has somehow missed.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: 20 Years for SP500 to Recover

Post by Malum Prohibitum »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
So I wonder what happens if, in March of 2000 I had, say, $250,000, and I continued from March of 2000 to Jan of 2013 to continue putting $4000 monthly into my low cost S&P500 index fund, just as I had leading up to March of 2000?

And then if I continued until August of 2022?
Malum Prohibitum
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Re: 20 Years for SP500 to Recover

Post by Malum Prohibitum »

First number looks like a little over a million, and the second looks like about four and one half million.
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Re: 20 Years for SP500 to Recover

Post by marcopolo »

Malum Prohibitum wrote: Tue Aug 09, 2022 5:31 pm First number looks like a little over a million, and the second looks like about four and one half million.
That's probably not inflation adjusted?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Gaston
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Re: 20 Years for SP500 to Recover

Post by Gaston »

burritoLover wrote: Tue Aug 09, 2022 3:44 pm
20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013
You should really beg for those type of periods in accumulation (barring job loss) as DCAing there netted you incredible gains as the market took off from the end.
Spot on. As Dr. William Bernstein has said, if you are in your 20s, a large and lengthy market decline is good news. For those of us not in our 20s, such a decline is less welcome.
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Re: 20 Years for SP500 to Recover

Post by visualguy »

The bigger issue is that the future may be different from the past. There is no fundamental law of economics which says that indexing the stock market (US, world, or whatever) cannot result in negative real returns over the long term such as 20 years.

By the way, something like 20 years is a REALLY long time when looking at the period where people can realistically hold a large amount of investment. Life is pretty short, and the period during which you can have a lot of money sitting in investments is even shorter. It takes a long time to make the money, and then you need to start withdrawing not all that long after that. There typically isn't even 20 years for the average lifetime of your money in the market. It's important to realize that this stock investment strategy is still a bet that may go wrong.

There aren't a lot of alternatives, but I think holding some assets in direct real estate is wise diversification for those who don't mind the slightly higher time and effort burden.
Malum Prohibitum
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Re: 20 Years for SP500 to Recover

Post by Malum Prohibitum »

marcopolo wrote: Tue Aug 09, 2022 5:33 pm
Malum Prohibitum wrote: Tue Aug 09, 2022 5:31 pm First number looks like a little over a million, and the second looks like about four and one half million.
That's probably not inflation adjusted?
No, it's not, but then over 22 years I would probably increase the $4000 monthly, too, due to inflation.
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Re: 20 Years for SP500 to Recover

Post by skierincolorado »

Given there is no way to be guaranteed to receive a return equal to the rate of inflation, the adjustment for inflation is arbitrary. The primary alternatives are cash and bonds, one of which is guaranteed to lose to inflation, and the other frequently loses to inflation over multiple decades.
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

dogagility wrote: Tue Aug 09, 2022 4:30 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
Dividends?

"Mark Hulbert, writing for "The New York Times," suggests that an investor could have fully recovered from the 1929 crash in four-and-one-half years. He bases his claim on the fact that deflation and inflation haven't been figured in to true stock values from the period, and the fact that dividends paid an average of 14 percent. In addition, he points out that the Dow is not the entire market, and that the broader market had some quick-recovery stocks in it."
If you are asking if the above timeframes reflect dividends being reinvested, the answer is yes.

The relative high during the Great Depression era occurred in August, 1929.

4.5 years later, say Feb 1934, the position was down ~40% (inf adj, div reinvested)

By late 1936, the position had grown to a bit more than break-even....only to fall again...

It didn't "permanently" recover its Aug 1929 level until May 1949.
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Re: 20 Years for SP500 to Recover

Post by CraigTester »

Malum Prohibitum wrote: Tue Aug 09, 2022 5:29 pm
CraigTester wrote: Tue Aug 09, 2022 1:55 pm To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
So I wonder what happens if, in March of 2000 I had, say, $250,000, and I continued from March of 2000 to Jan of 2013 to continue putting $4000 monthly into my low cost S&P500 index fund, just as I had leading up to March of 2000?

And then if I continued until August of 2022?
I think Portfolio Visualizer can help you with this example.....

But as far as the $250,000 goes, it will be worth the same inflation adjusted value in Jan 2013 as it was in March 2000.
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Re: 20 Years for SP500 to Recover

Post by garlandwhizzer »

CraigTester wrote:

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
Some have voiced minor objections to this post, but I think it makes an important point. There are long decade plus periods when stocks either go down or produce no real gains. Those periods are very difficult to tolerate, but fortunately they are very rare. Each one was followed by a massive bull market (1921-1929, 1949-1968, 1982-1999, 2009-2021). Those bull market gains dwarf the extent bear market losses so much that investors forget about the bear market and develop ever growing optimism for years. The same volatility is true even for Treasuries which lost money in real inflation adjusted terms for 42 years running (1940-1982) prior to the start of the greatest Treasury bull market in history (1982 -2021) with massive risk-free real gains for almost 4 decades. Unexpected inflation hit in 2021 and suddenly the downside of nominal "safe" bonds became apparent. I am not aware of any expert who predicted this turn around before it happened, certainly not the FED or bond gurus who kept pushing LTT. Currently 30 year Treasuries are yielding about minus 6% after suffering huge principal losses quickly. So much for predictions.

I believe the take home message is that there are no safe non-volatile assets that are expected to be always stable or increasing in value. Every asset, even "safe" assets like Treasuries, can on occasion show a nasty downside and it can last for a long time. Investing is a little like getting on board to an endless roller coaster. Whether fear and loss or excitement and gain are the dominant themes of your ride are heavily influenced by when you get on and when you get off. Basically the blind luck of timing those two points has a big impact on your investment results. We're now at the end of a very long period of great investment results for both stocks and bonds (1982- 2021). This raises this question among some about whether we are about to enter one of those long decade plus grim periods? Or it might just be more of the same. Lots of opinions, but of course those opinions are only guesses and may say more about the guesser than the future.

What we do know with certainty is that if you don't invest regularly and consistently long term your asset base doesn't grow and in fact loses to inflation over time. Bogle said, "invest we must," and as usual he was right. The other choice fails 100% of the time. Unless you start out with extremely deep pockets, you will wind up old and poor without investing. We also know that if history is a reliable guide, the longer the investing pain goes on, the greater is the expected reward for those few with endless patience who kept investing on a regular basis throughout the long painful years of loss. There is nothing inherently wrong with buying assets when others don't want them and they're on sale like in bear markets. You merely have to hold them the sun decides to shine again to get rewarded. You have no control over that when happen, nor can you accurately predict it.

There is no absolute certainty in any strategy over any given time period, but stubborn adherence to your investing strategy that may be the best you can do. The market dictates to us, not the other way around. All we can control is ourselves and try to respond rationally rather than emotionally when the inevitable bad times happen. As the saying goes, "You make your money in bear markets. You just don't realize it at the time."

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Re: 20 Years for SP500 to Recover

Post by squirrel1963 »

CraigTester wrote: Tue Aug 09, 2022 2:53 pm
Firemenot wrote: Tue Aug 09, 2022 2:33 pm I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if you’re point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
The time periods, as hopefully understood, are cherry picked. But nevertheless, they still happened.

So my point is simply to plan accordingly....
For an investor starting working at 25 yrs of age cherry picking is not relevant, but cherry picking is absolutely relevant for any retiree like me.

By definition the retirement date is cherry picking, so anyone who retired on those 4 dates would have had a lot of trouble in stocks indeed.

So OP I 100% agree with your point. Retirement planning should be made by cheery picking the worst 4 periods in mind. Any other planning is wishful thinking in my opinion.
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Re: 20 Years for SP500 to Recover

Post by squirrel1963 »

garlandwhizzer wrote: Tue Aug 09, 2022 6:47 pm
CraigTester wrote:

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)
Some have voiced minor objections to this post, but I think it makes an important point. There are long decade plus periods when stocks either go down or produce no real gains. Those periods are very difficult to tolerate, but fortunately they are very rare. Each one was followed by a massive bull market (1921-1929, 1949-1968, 1982-1999, 2009-2021). Those bull market gains dwarf the extent bear market losses so much that investors forget about the bear market and develop ever growing optimism for years. The same volatility is true even for Treasuries which lost money in real inflation adjusted terms for 42 years running (1940-1982) prior to the start of the greatest Treasury bull market in history (1982 -2021) with massive risk-free real gains for almost 4 decades. Unexpected inflation hit in 2021 and suddenly the downside of nominal "safe" bonds became apparent. I am not aware of any expert who predicted this turn around before it happened, certainly not the FED or bond gurus who kept pushing LTT. Currently 30 year Treasuries are yielding about minus 6% after suffering huge principal losses quickly. So much for predictions.

I believe the take home message is that there are no safe non-volatile assets that are expected to be always stable or increasing in value. Every asset, even "safe" assets like Treasuries, can on occasion show a nasty downside and it can last for a long time. Investing is a little like getting on board to an endless roller coaster. Whether fear and loss or excitement and gain are the dominant themes of your ride are heavily influenced by when you get on and when you get off. Basically the blind luck of timing those two points has a big impact on your investment results. We're now at the end of a very long period of great investment results for both stocks and bonds (1982- 2021). This raises this question among some about whether we are about to enter one of those long decade plus grim periods? Or it might just be more of the same. Lots of opinions, but of course those opinions are only guesses and may say more about the guesser than the future.

What we do know with certainty is that if you don't invest regularly and consistently long term your asset base doesn't grow and in fact loses to inflation over time. Bogle said, "invest we must," and as usual he was right. The other choice fails 100% of the time. Unless you start out with extremely deep pockets, you will wind up old and poor without investing. We also know that if history is a reliable guide, the longer the investing pain goes on, the greater is the expected reward for those few with endless patience who kept investing on a regular basis throughout the long painful years of loss. There is nothing inherently wrong with buying assets when others don't want them and they're on sale like in bear markets. You merely have to hold them the sun decides to shine again to get rewarded. You have no control over that when happen, nor can you accurately predict it.

There is no absolute certainty in any strategy over any given time period, but stubborn adherence to your investing strategy that may be the best you can do. The market dictates to us, not the other way around. All we can control is ourselves and try to respond rationally rather than emotionally when the inevitable bad times happen. As the saying goes, "You make your money in bear markets. You just don't realize it at the time."

Garland Whizzer
Garland, OP, really good post and really good comment. We should all treasure these words and plan accordingly.
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AlwaysLearningMore
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Re: 20 Years for SP500 to Recover

Post by AlwaysLearningMore »

CraigTester wrote: Tue Aug 09, 2022 1:55 pm I continue to see numerous misleading/misinformed claims throughout this forum, like:

"The SP500 recovered in several years after the great depression", or the "SP500 has always recovered in just a few years, stay the course, etc…"

And while these claims can sometimes be tortured to be sort of true (for an interim moment), they can be extremely misleading or sometimes just plain wrong.

And most importantly, they can perhaps lead some unsuspecting Bogleheads to sign up for more risk than they had intended/understood with their AA, etc...


So…, Rather than derail other threads when these types of claims are made, I thought it would be helpful to everyone to have the facts nailed down.

To that end, below are example periods of time when the SP500 required more than a decade to “permanently” exceed a previous high water mark.

20 yrs. May 1901-Aug 1921
20 yrs. Aug 1929–May 1949
15 yrs. Nov 1968-Mar 1983
13 yrs. Mar 2000- Jan 2013

Note that dividends are reinvested and returns are inflation adjusted. (Source: Shiller online data)

So I invite all the number crunchers out there to vet this data, argue about rounding error, cherry picking, etc....

But once we all agree on the math, perhaps we can add some version of this to the basic body of knowledge that all Bogleheads understand as they make their AA decisions, rebalancing schedules, lump sum decisions, etc.

All the best,

Craig Tester
Do your examples imply that an investor made their entire investment at the market highs prior to their drops (and no DCA)?
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dogagility
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Re: 20 Years for SP500 to Recover

Post by dogagility »

CraigTester wrote: Tue Aug 09, 2022 6:27 pm
dogagility wrote: Tue Aug 09, 2022 4:30 pm
CraigTester wrote: Tue Aug 09, 2022 2:38 pm
burritoLover wrote: Tue Aug 09, 2022 2:05 pm Do your numbers account for deflation?
Yes. Numbers are simply adjusted to the CPI each month. This is true whether CPI increases (e.g. inflation) or decreases (e.g. deflation)
Dividends?

"Mark Hulbert, writing for "The New York Times," suggests that an investor could have fully recovered from the 1929 crash in four-and-one-half years. He bases his claim on the fact that deflation and inflation haven't been figured in to true stock values from the period, and the fact that dividends paid an average of 14 percent. In addition, he points out that the Dow is not the entire market, and that the broader market had some quick-recovery stocks in it."
If you are asking if the above timeframes reflect dividends being reinvested, the answer is yes.

The relative high during the Great Depression era occurred in August, 1929.

4.5 years later, say Feb 1934, the position was down ~40% (inf adj, div reinvested)

By late 1936, the position had grown to a bit more than break-even....only to fall again...

It didn't "permanently" recover its Aug 1929 level until May 1949.
So that's not 20 years to recover.

Same thing for your 1901 start date.

Very misleading post.
Last edited by dogagility on Tue Aug 09, 2022 8:06 pm, edited 2 times in total.
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Re: 20 Years for SP500 to Recover

Post by martincmartin »

alex_686 wrote: Tue Aug 09, 2022 3:05 pm So to extend on this, lots of people think the stock market has some type of mean reversion principle. It does not.
This is a very strong statement. Can you back it up with either theory or data? In fact, the data presented here seems to back it up.
The market is pretty much a random walk.
This is an empirical statement about stock markets. It is not an axiom, or true by definition.

It is approximately true over some time scales in many situations, but not all.

For example, discounted cash flow is a thing. People need food, housing, entertainment, energy, etc. In free market economy, these are provided by companies, which make profits. As a shareholder, you get a share of those profits. If stocks have crashed by 90% to where price is only 5x future expected earnings, they're unlikely to crash another 90%. If you do, you could buy then and make your money back in 6 months, even if the stock price went to zero. After that, the earnings you got would be pure profit. But of course, the price wouldn't go that low.

A graph of the CAPE-10 over decades does not look like a random walk.
That the market was high last year and low this year does not contain much in the way of statically useful information.
The stock market as a whole can be reasonably modeled as a random walk from one year to the next. But I think it breaks down when you look at decade level returns.
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Re: 20 Years for SP500 to Recover

Post by MichRoots »

In March 2000, I had maybe $10,000 in my 401k. By the summer of 2013. I had $100,000 in my 401k. Yes there was a lot of horrible markets in between those years.
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Re: 20 Years for SP500 to Recover

Post by seajay »

A factor with recovering to former inflation adjusted highs is that can be distorted by high volatility. 1980's and the price of silver spiked 10 fold (not sure of the year or magnitude/level, just using a ballpark example), and relatively quickly fell back down again. Such a short/large volatility event would obviously have had silver "under-water" for many years subsequently.

1920's were known as the Roaring 20's, where stocks doubled, doubled again, doubled yet again. The subsequent Wall Street Crash saw prices halve, halve again and halve yet again. Measuring drawdowns from the late 1920's high was in effect similar to measuring post silver 1980's highs drawdowns.

Late 1990's and stock valuations were high. You could buy a one ounce gold coin with a legal tender value of 100 for 160, such that if the price of gold fell more that a third you could still spend the coins as legal tender, maximum downside was limited to a maximum of minus a third. By 2011 the price of gold had risen at a 15% annualized real rate such were the 1999 low gold prices. Other measures such as PE ...etc. further confirmed relative/excessively high stock prices, that had arisen out of relatively hard/fast gains, a somewhat repeat of the Roaring 20's but to less extremes. Again resulting in subsequent 'poor' returns in the 2000's.

Pre-cursor to each of the 1901, 1929, 1968, 2000 cases were abnormally hard/fast prior gains. Same for Japan 1990 when during the 1970's/1980's gains/expansion were massive (the likes of Sony, Yamaha ...etc. becoming global household names).

Most investors will not have lumped all-in to their portfolio at the peaks, but have instead averaged in over years. Such that max drawdowns are more a mathematical measure than a real world measure, where the math is such that periodic high volatility 'distorts' the picture.

What if a trader trades 32,000 Dow shares at $1 in error to placing a trade of selling 1 share at $32,000 .. scaled a million-fold, along similar lines to what has actually happened for real in the past (believe it was a Yen/Japanese based outfit that led to the companies bankruptcy ???). Massive short lived price volatility, that could make subsequent drawdown measures relative to those high ... near never being 'recovered'.
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Re: 20 Years for SP500 to Recover

Post by marcopolo »

squirrel1963 wrote: Tue Aug 09, 2022 6:53 pm
CraigTester wrote: Tue Aug 09, 2022 2:53 pm
Firemenot wrote: Tue Aug 09, 2022 2:33 pm I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if you’re point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
The time periods, as hopefully understood, are cherry picked. But nevertheless, they still happened.

So my point is simply to plan accordingly....
For an investor starting working at 25 yrs of age cherry picking is not relevant, but cherry picking is absolutely relevant for any retiree like me.

By definition the retirement date is cherry picking, so anyone who retired on those 4 dates would have had a lot of trouble in stocks indeed.

So OP I 100% agree with your point. Retirement planning should be made by cheery picking the worst 4 periods in mind. Any other planning is wishful thinking in my opinion.

Isn't that exactly what the most discussed retirement portfolio sizing (SWR) studies do?

They are not based on the average, but rather the worst periods, including the ones listed here. Sure, things could be worse in the future. But, it's not like this isnt already taken into account for most retirement planning.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: 20 Years for SP500 to Recover

Post by squirrel1963 »

marcopolo wrote: Tue Aug 09, 2022 9:49 pm
squirrel1963 wrote: Tue Aug 09, 2022 6:53 pm
CraigTester wrote: Tue Aug 09, 2022 2:53 pm
Firemenot wrote: Tue Aug 09, 2022 2:33 pm I don’t think starting the time period at the absolute height of stock market euphoria is fair. That just skews the period longer. So yeah, if you’re point is that if you dump all of your money in at the absolute peak of a historic bull market, it could take many years to come back to even, then fine.
The time periods, as hopefully understood, are cherry picked. But nevertheless, they still happened.

So my point is simply to plan accordingly....
For an investor starting working at 25 yrs of age cherry picking is not relevant, but cherry picking is absolutely relevant for any retiree like me.

By definition the retirement date is cherry picking, so anyone who retired on those 4 dates would have had a lot of trouble in stocks indeed.

So OP I 100% agree with your point. Retirement planning should be made by cheery picking the worst 4 periods in mind. Any other planning is wishful thinking in my opinion.

Isn't that exactly what the most discussed retirement portfolio sizing (SWR) studies do?

They are not based on the average, but rather the worst periods, including the ones listed here. Sure, things could be worse in the future. But, it's not like this isnt already taken into account for most retirement planning.
Some of these tools to back-testing with market conditions seen in the past (and they do use all periods yeah) and some use Monte Carlo statistical analysis.
Either way they are supposed to take worst case past scenarios into account.

It helps though being aware of these historical periods, you can do a lot of SWR ballpark calculations with relatively trivial math. If you follow LMP approach and sufficiently size the rungs to pay you say 80% of your past expenses then you don't even need to do back-testing, even though probably should just to see what happened in the past.
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