I am so old, I can remember the day that Dow Jones Industrial Average permanently broke the milestone value of 1,000. It was in December 1982 – when I was still in high school. I was enough of a business & investing geek even then to recall reading about it in the newspaper.
Now, with the DJIA pushing almost 35x that landmark, I’m astounded to see that the market has grown +9.58% on average every year since that time. Add in dividends and you have double-digit returns on average over four decades. Truly a golden age!
Yet we all know that the market doesn’t move straight up. There have been a lot of bumps in the road since that time, which got me thinking bout volatility of returns. I ran across this Vanguard chart that gives us long view …
Starting in 1980, it shows the 30-day volatility in the S&P 500. Your eye is quickly drawn to the few scary peaks, but overall the market is no more volatile over the last 5-10 years as the previous 30. Behind the green line, you see the S&P 500 significantly gaining in value, despite the double-bump between 2000-2010.
I was pretty heartened by this chart. Crises are going to emerge, but the market has gotten back to its growth trend pretty quickly. Volatility tends to come in sudden big waves, but then those waves subside pretty quickly.
I suppose as the market is bigger and more diversified we should expect more stability. Still, it’s good to see it actually behaves that way. Only the good lord knows what the next 10 years will bring – likely a big downturn or two – but hopefully businesses will get back on track for the long-term. Just as they have over the last 40 years.
How Do You Interpret This Trend?
Image Credit: Pixabay