Stocks post best annual gain in 6 years with the S&P 500 surging more than 28%

https://www.cnbc.com/2019/12/31/dow-futures-last-trading-day-of-2019.html

by tempsy • 7 years ago

22 23 7 years ago

nabla92• 7 years ago

The value of the index tells very little. You must compare market cap to something and look at the ratio.

Here is good summary of important ratios December 27, 2019 https://www.yardeni.com/pub/valcapsales.pdf SP500 price to sales, price to earnings, market capitalization, TOBIN’S q.

We don't know what happens, but it's certain that if you buy SP500 at current price level, you must accept significantly smaller return next 10 years than previous 10 years.

tempsy3• 7 years ago

What do you mean “tells you very little”?

You invest $1 in S&P at beginning of the year and now it’s $1.28.

Gibbon13• 7 years ago

Also means that a dollar invested stocks today buys you 22% less stock than a year ago. Basically this is inflation nothing more.

yxchng• 7 years ago

Isn’t 2009-2019 gain much greater than 1999-2009 gain? What makes you think that the next 10 years will generate smaller return?

perl4ever8• 7 years ago

People always predict the future from the past, but there are different ways to define a pattern.

Many people think that since the US stock market returned 8-10% for the last ~30 years, then it will for the next 30. This has worried me for a long time for various reasons, but nobody seems interested in my reasons.

However, a new way of looking at things occurred to me recently. In the early 80s, 30 year treasury bonds were ~10%, and with hindsight, stocks were very good buys too. If you bought either one and held until now, you would have made a pretty similar amount. So, if the future resembles the past, maybe what we should expect is that the stock market return for the next 30 years will be the same as the interest on a 30 year treasury today. Nominal, not inflation adjusted, which means ~2.3% is the best case scenario, and civilization collapses if inflation returns. Also, since dividends are about 2% and inflation is not zero, that means after tax returns for non-retirement funds are going to be essentially nothing.

nabla92• 7 years ago

What makes you think that the next 10 years will generate smaller return?

Look at the link I provided.

If you have goose that lays golden egg worth $1000 every year, and the price of the goose goes from $20,000 to $30,000, how does the ROI (return of investment) change?

Valuation of thing relative to valuation it provides is important. All the factor of economic growth in OECD countries are declining so you should expect lower ROI (once the effect from increasing leverage stops).

https://institutional.vanguard.com/VGApp/iip/site/institutio...

powowow• 7 years ago

A good way to have a great annual return in year y+1 is to have a 21% decline during December of year y.

vanniv3• 7 years ago

2016: +11.96%

2017: +21.83%

2018: -04.38%

2019: +32%

(All numbers are total return, the 2019 source didn't have fractions of a %)

That's not a bad four years' return.

(Yes, December 2018 had a big decline -- but the first 11 months of the year were pretty good, and we ended only 4.38% off even with the 21% decline in the last month)

perl4ever8• 7 years ago

What is the significance of four years? Personally, I prefer to talk about my three year return.

Stocks post best annual gain in 6 years with the S&P 500 surging more than 28%

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