If you’d like a little bit of comfort as a long-term owner of stocks, check out this chart from Ben Carlson at A Wealth of Common Sense. He looks at every rolling 22-year period (based on a reader request) between 1926 to 2023, and finds that the minimum return during any 22-year period is still 1.4% above inflation. The average is a pretty impressive 7.2% above inflation.
Another interesting takeaway from this chart is that the enemy of after-inflation returns is not necessarily an intensely traumatic event like the Great Depression or World War II or the Great Financial/Housing Crisis, but also an extended period of high inflation. The worst real return period was around the 1970s:
Surprisingly, the worst 22 year period for real returns was not in the aftermath of the Great Depression but rather in the 1970s. The two-plus decade real return ending in the summer of 1982 was just 1.4% per year. That time frame featured an annual inflation rate of nearly 6% which is a high hurdle rate to beat.
Here is the a similar chart, but not adjusted for inflation.
The Best Credit Card Bonus Offers – November 2024
Big List of Free Stocks from Brokerage Apps
Best Interest Rates on Cash - November 2024
Free Credit Scores x 3 + Free Credit Monitoring
Best No Fee 0% APR Balance Transfer Offers
Little-Known Cellular Data Plans That Can Save Big Money
How To Haggle Your Cable or Direct TV Bill
Big List of Free Consumer Data Reports (Credit, Rent, Work)
This is interesting given that we are in a 70s-type environment right now. I could definitely see us having 8% inflation and 6-8% stock market returns for the next ten years, especially given how high multiples still are.
Why 22 years? That seems a little cherry-picked, no?
The linked Ben Carlson article features a question from a couple with 22 years until they want to retire and specifically asks three questions on 22 year periods.