31 years of stock returns

I enjoy slicing and scaling historical stock market returns.

I’m not naive enough to assume that this helps predict the future. However, studying the past can provide a baseline to help set expectations regarding risk and a potential range of outcomes.

Here’s a different way to look at returns over different time horizons for the S&P 500 since 1993:

Here’s how to read this chart:

Choose a start year. Then, drop the number of years and the corresponding square will tell you the annual return from that starting point.

For example, the 9-year annual return, starting in 1993, was 14% per year.

You can see that there has been more green than red since 1993, but there have been some painful times for investors.

There were no losses for 11 years or more, but starting in 1999 or 2000 led to a lost decade. You also had multiple time frames, with losses coming out 2, 3, 4 and 5 years into the future. Five years can feel like an eternity in the stock market.

The range of results is also interesting to consider.

Annualized 10-year returns ranged from -1% to 17%. Over 15 years it was a high of 14% and a low of 4%. Over a 5-year time horizon, the range was from -2% to 29% annually.

Your stock market experience can vary drastically depending on your timing.

The good news is that the long run takes a lot of variance out of the equation. Look at the returns on the bottom left – they’re all in a pretty tight range.

The 31-year annual return from 1993 to 2023 was about 10% per year, even at long-term averages. Not bad.

Here’s a sampling of what’s happened over the past 31 years:

An emerging market currency crisis in 1998, the explosion of long-term capital management, the dot-com bubble, 9/11, the housing bubble, the Great Financial Crisis, the European Debt Crisis, the pandemic and the biggest increase in inflation in four decades.

We’ve also sprinkled in a few recessions, two massive market crashes, two bear markets, and ten double-digit corrections.

And the stock market still returned 10% a year.

I don’t know what the returns will look like in the next three decades.

But I am confident that there will be plenty of risks, recessions, geopolitical crises, scary headlines and economic contractions.

Regardless of the returns the stock market produces in the future, thinking and acting long-term remains the soundest strategy for investors.

Further reading:
60/40 portfolio win rate