on january 1, 1970 the SPX was at 93. four years later, 12/31/1974 it closed at 68.56 for a four year return of -26.3.
on january 1, 2000 the SPX was at 1,469.25. four years later, 12/31/2004 it closed at 1,211.93 for a four year return of -17.5.
the SPX struggled the entire decade of the 1970’s closing on 12/31/1979 at 107.94 for a total, 10 year gain of only +16% (about 1.3% per year / simple / non compounding / not including dividends).
whoa! 1.3% per year for 10 years? that’s terrible!
but that couldn’t happen now, right? back then they had rising interest rates & high oil prices. today we have rising interest rates & high oil prices. (uh-oh!)
i wonder if, on 12/31/2009 we’ll have gained 16% from 1/1/2000? or more? or less? if i were a “buy & hold” investor nearing retirement i think i’d be pretty nervous these days!
I entered the stock biz in January of 1973. The Dow crossed above 1,000. I remember seeing it on the ticker tape and everyone in the office standing up and cheering. Two years later it was down almost 50%. To put it in today’s terms, think of the Dow being about 5,500 by the end of 2006.
Of course, the market wasn’t nearly as expensive in January of 1973 as it is today. So who knows what could happen.