In his Washington Post column, Allan Sloan recalls just how good the good times were:
For a generation -- August 1982 through March 2000 -- U.S. stocks had their greatest run ever. The S&P 500 returned almost 20 percent a year, compounded, including reinvested dividends. You doubled your money in less than four years, quadrupled it in a little more than seven. It's the kind of thing people could get used to, and over a generation, many did.The aftermath? Ten years of volatility and market trauma.
The chart of the DJIA below is revealing for two reasons: market swings are kept in proportion thanks to a log scale, and you can compare the nominal average with the real (inflation-adjusted) version. Props to Terence Corcoran for including the chart with this Financial Post comment.
The bad news: Corcoran suggests that the stock market's "lost decade" could be the first leg of another major market downturn, like 1966-82. We haven't actually slumped that much yet, kept aloft for a while by the real-estate and financial bubbles. But the first phase of the previous slump didn't seem too bad, either: Though "story stocks" might tank, market gurus opined circa 1970, nothing could ever go wrong with Xerox, Avon and the other famous large-cap names that made up the "Nifty Fifty."Well, almost nothing.
The good news: If we are in the midst of an eighteen or twenty year slump, we're at least half way through it. For the rest of way, Boomers (the employed ones) may be able to invest at relatively favorable levels. By the time they retire or semi-retire in 2018 or 2020 and the market turns up, they should feel pretty good financially.
Meantime, they better heed Sloan's last bit of advice: "… take care of yourself by living below your means, doing your homework, and being careful and skeptical."
Related post: The Next Stock Market Boom.
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2 comments:
I guess sometimes truth is stranger than fiction!
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