So let's take a sweeping view of what has happened on a long, long time scale: 18 years and then 113 year. For 18 years we will look at the S&P rather than the DOW because it encompasses a much wider and more comprehensive range of shares. For 113 years we will look at the DOW because that's what is available.
In the last 18 years the S&P has risen by 190% or 6% pa. However it has been a bumpy ride.
- In the first five years the market made over 160% or 21% pa
- It had a second thrilling run starting at the end of 2002 and lasting to the end of 2007 when it gained 105% or 15.5% pa
- and then there was the period that started in early 2009 and has continued to the present with two short though violent breaks. The first two runs lasted 5 years each and the present one has lasted four and a half. This time the gain was about 150% or 23% pa
- The tech bubble wiped over 50% off the value of shares in just over two years
- The sub-prime mortgage crisis and the banking crash that followed wiped 58% off the value of shares in not much more than a year
What can happen in 100 years
- We seem to be in a period of flatness: measured by the S&P the market has only risen by 9% in 13 years (less than 1% pa)
- the up periods during this phase have almost reached the speed of growth seen in the 1920s bubble which ended in the biggest crash seen so far. They have ended in 50%+ crashes
- earlier periods of flatness such as 1906 to 1924 and 1964 to 1983 have presaged strong bull runs.
- periods of flatness (or should we say periods of little progress), including the current one have been characterized by violent ups and downs
Nevertheless we may not have cleared the area of choppy water that characterizes those periods when the market makes no headway for decades at a time.
The pace of growth is dangerously fast and we may well see another 50% dive before we finally get a new long bull run.