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.
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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.