21 Facts About Long Term Stock Market Returns

Tuesday, April 21, 2020 |

As I write this (04/14) the market is up over 25% off the low. While the bounce is acting like a typical Bear Market rally (though of high magnitude) and the economic uncertainty is high, the amount of monetary/fiscal stimulus is unprecedented both in size and speed and it appears that some of the more dire COVID-19 predictions a month ago were too pessimistic.

In short, who knows if the short-term bottom is in and it’s probably a trader’s market. For long-term investors though such uncertainty matters little. This post is a reminder of that.

All data is from the S&P 500 Total Returns Post-WII (October 1946) through April 14th annualized unless noted otherwise. Source = Bob Shiller.


  1. REAL total returns (after inflation) have been 7.3% annualized
  2. NOMINAL total returns have been 11.0% annualized
  3. NOMINAL % Positive: 10 Years = 97% | 15 Years = 100%
  4. REAL 20 Year returns > 3% = 84%
  5. The worst 30 Year REAL return = 4.0%
  6. The current 20 Year NOMINAL Total return = 5.4%... when trailing 20 Year NOMINAL Total returns are between 4% and 7% the next 20 Years have generated returns over 8% in each instance (62 observations)
  7. When using various Cyclically Adjusted Profit Earnings (CAPE) valuation metrics, the average forward 10 Year REAL return at these valuation levels is between 5%-6%

Earnings + Dividends

  1. REAL earnings have grown at 3.4% annualized
  2. NOMINAL earnings have grown at 7.0% annualized
  3. REAL price growth = 4% and NOMINAL price growth = 7.4%... Stocks growth with earnings
  4. Over the last 20 years, NOMINAL earnings growth = 5.5% and NOMINAL price growth = 1%
  5. In 2009 earnings growth was -90% with stocks down about 50%... Stocks realize earnings don’t stay depressed forever
  6. NOMINAL dividends have grown at 2% annualized…
  7. That means your dividend income doubles roughly every 12 years

Vs Bonds (Intermediate Treasuries)

  1. REAL Bond returns have been 2.1% annualized, trailing stocks by 5.2%
  2. With the 10 Year Treasury < 50% (currently at 0.74%) REAL stock returns averaged 10.5% over the next 20 years
  3. If you buy and hold a 10 Year Treasury bond today at 0.74%, you’re locked into 0.74% annualized NOMINAL return over the next 10 years, if inflation is higher than that your REAL return will be less than 0%
  4. Since 1900, REAL 20 Year bond returns > 3% = 36%
  5. Since 1900, REAL 20 Year bond returns > 3% with the 10 Year Treasury < 2.50% = 0%
  6. Since 1900, the worst REAL 20 Year bond returns = -1.1%... Bonds may destroy purchasing power despite less short-term volatility
  7. Market earnings currently yield more than the 10 Year Treasury relative to their historical average

Note: Bonds still may have utility even with low projected returns: 1) dampen downside volatility 2) source of liquidity when stocks are in a drawdown

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. No person or system can predict the market.

Past performance is not indicative of future results.

S&P 500: The index measures the performance of 500 widely held stocks in the US equity market. Standard and Poor's chooses member companies for the index based on market size, liquidity and industry group representation. It is market capitalization-weighted. Investors cannot invest directly in an index.

Data (average monthly close) per Bob Shiller dataset from 1871 to 2019. Price data (month-end close) after 1928 per Morningstar Direct. CAPE, Dividend (Total Return), and CPI (Real Return) per Bob Shiller and calculated by CAL.

REAL = real rate of return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation. NOMINAL return is not adjusted for inflation.

Investing involves risk, including the loss of principal. There are some risks associated with investing in the stock markets: 1) Systematic risk - also known as market risk, this is the potential for the entire market to decline; 2) Unsystematic risk - the risk that any one stock may go down in value, independent of the stock market as a whole. This also incorporates business risk and event risk; and 3) Opportunity risk and liquidity risk.

The bond market is volatile and carries interest rate, inflation, liquidity and call risks. As interest rates rise, bond prices usually fall, and vice versa. Change in credit quality of the issuer may lead to default or lower security prices. Any bond sold or redeemed prior to maturity may be subject to loss.