Commentators bemoan the lost decade for stocks. In Canada, returns were positive, but low over the last decade, but in the US, returns of the S&P 500 were actually negative. According to Larry Swedroe, this is the first time since the great depression that this has happened over 10 or more years.
However, if we subtract out inflation, returns look even worse. As Larry shows, there have been three periods of at least 10 years since the depression that the S&P 500 has failed to beat inflation. These periods ended in 1947, 1983, and now (at least we hope it doesn’t continue).
This is all very depressing, and can make us want to give up on stocks altogether. However, I wondered what happened after these bad times. Here are the S&P 500 total returns (including dividends) for the decade after these “lost decades”:
1948 to 1957: 14.4% above inflation
1984 to 1993: 10.7% above inflation
2010 to 2019: ?
As you can see, those first two decades were spectacular! There is no guarantee that the upcoming decade will match these impressive results, but it does give us some hope.