99 Year Perspective On U.S. Markets: Stocks, Bonds, T-Bills And Inflation. Is The Bull Getting Tired?
- Despite a 2.7% decline in December, 2024 saw the S&P 500 earn a stellar 25%, marking a strong year for stocks.
- Stocks have shown positive returns most of the time, with the past 16 years being the longest bull market.
- The past decade delivered the best Sharpe ratio for stocks (.73) but one of the worst for bonds (-.02%).
- Wall Street forecasts an 8% return in 2025, below the 99-year average but suggesting continued market highs.
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Despite the fact that a “Santa Rally” did not happen this year – the S&P500 declined 2.7% in December-- the year 2024 was still stellar, earning 25%. The following 2 histograms put 2024 into perspective. It was a very good year for stocks but not so good for bonds.
Annual Returns
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It’s interesting to note that stocks have positive returns most of the time, as shown in the following. It’s also instructive to be aware that the past 16 years have been the longest bull market for stocks.
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Cumulative Returns
The following table summarizes returns over 5-year and 10-year periods. This past 10 years has delivered the best Sharpe ratio – return per unit of risk – of .73 for stocks but one of the worst for bonds, losing .02% per unit of risk. There are other interesting facts you’ll find in the table. Spend some time there.
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Conclusion
2024 was a very good year for stocks, and the 3rd year in this decade to earn more than 20%. It’s been a Roaring 2020s so far. As a result, the US stock market is very expensive by any measure, which historically has led to a correction.
Nonetheless, Wall Street is forecasting an 8% return in 2025. That’s below the 10.4% average nominal return over the past 99 years, but it is a forecast of even higher highs. Do you believe it? Will “The Bull” keep running this new year or is it getting tired?
Happy New Year
More By This Author:
A Look Behind The Gaslight Curtain: Optimistic Assumptions Underlie Forecasts Of 2025 Stock Market Performance
Santa’s Gift to the Stock Market
Framework for Forecasting Next Year’s Stock Market Return
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