Stock Market Annual Performance since 1929 (bar chart)

(Last updated Sept 2020)

In this post, we graph total stock market returns by year -- going all the way back to 1929. Total return includes dividend income as well as capital appreciation; the previous post in the stock market performance history series considered only closing prices/ capital appreciation. (Note: if you are especially interested in 1929-32, see The 1929 Crash.)

Dow Index Annual Performance Graph: 1929 - 2019

Dow Yearly Total Return 1929 - 2019

The bar chart above (click on image to enlarge it) shows the DJIA (Dow Jones Industrial Average) total yearly return for close to 100 years. (To see a stacked bar chart showing the contribution that earnings growth, dividends, etc. made, by year, see The Extraordinary Impact of P/E Ratios.) A regular line graph gives you little sense of the year-to-year performance; I think the bar/column chart works much better. What can we learn from this graph? Initially, about all I could conclude from this extensive performance history was:

• Stock market returns vary a lot from year to year
• The market goes up a lot more often than it goes down, but you can sometimes lose money
• The down years are often isolated, "one-off" events, and usually smaller than the up years -- kinda like speed bumps
• While most down years seem to result in "minimal" losses, a few resulted in substantial losses of more than 20%

Dow Yearly Return Frequency Chart

(histograms are through 2019)

Dow Yearly Return Frequency

In the histogram above (click to enlarge), the label below each bar is the range of returns represented by that bar. For example, we see that at the low end there were 5 years with losses between 50% and 20%, and, on the far right, two years with gains between 50 and 75%. There were no years with returns below -50% or above +75%. For me, the histogram provides a more useful view of this data; the variability from year to year is still pretty mind-boggling. However, now I can see that:

• Stock market returns are negative about 22 (or about 25%) of the years; so, about 75% of the years have positive returns. And, the positive returns are sometimes very positive indeed.
• About two thirds of the time (58 years), the returns have been between 0% and 30%

What's not to like? It looks like when you lose, you lose a little, but when you win you can win a lot!

In addition, you could make the argument that investing is not a one year deal, so it makes more sense to look at performance history over the longer term. Here's the same histogram as above, but with 10-year returns instead of yearly returns.

Dow 10-Year Annualized Return Frequency Chart

Dow 10-Year Return Frequency

Note that this is the same data, with the same return ranges along the x-axis (horizontal axis). However, look at how much less variability there is in the rates of return! Also note that, because we are looking at 10 years at a time, there are 10 fewer data points -- 1929-1939, 1930-1940, ... 2009-2019. The apparent message here is that, over 10 year periods:

• Approximately half the time the 10-year return was between 0% & 10% per year
• Approximately half the time was between 10 & 20% per year
• In theory, people have not lost money when buying and holding the Dow index for 10 years or longer. Note, however, that theory ignores the impact of taxes and fees. Still, it's pretty impressive.

Conclusions

Again, what's not to like? Stock market history seems to suggest that worrying about the year-to-year variability (let alone worrying about monthly, weekly, or day-to-day variability) is a fool's errand. You could conclude from looking at the above graphs that investing in the stock market can be a very good thing indeed; I think that's true. You might also conclude that it's virtually impossible to lose money in the stock market over the long term. I'd hold off on that one. You might want to review, for example, the graph of rolling 10-year stock market returns. Equally importantly, take a look at The Variability of 10-Year Stock Market Returns in Dollars to see what impact these apparently small differences in 10-year annualized returns can have on the value of your retirement portfolio.

Notes: The above charts are based on DJIA (Dow Jones Industrial Average) data through 2019. Results would be conceptually the same if we used S&P 500 data.

Related Materials

More on the variability of stock market returns
Range of Stock Market Returns from 1-100 Years: graph of best & worst past returns for 1, 2, 3, ... 100 year periods.
25 Best & Worst Yearly Stock Market Returns: a closer look at 1-year returns
Range of Stock Market Returns in DOLLARS: A critical, and surprising, perspective.
Rolling 10-Year Stock Market Returns: all 10-year returns, not just best & worst.
Variability of 10-Year Stock Market Returns, in Dollars: a closer look at variability of returns over 10-year periods.

And the causes of that variability
The Extraordinary Impact of P/E Ratios the contribution to yearly return made by earnings, dividends and change in p/e.
P/E Ratio Impact on Future Returns: Returns of purchases made when p/e is high compared to returns of low p/e purchases, in dollars.
Initial P/E Ratio vs. 10-Year Returns: Shows the 10-year returns that resulted from purchases at each initial P/E ratio; demonstrates importance of P/E at time of purchase.

Additional long-term investment performance history
Dow 100 year stock market history chart: Graph of Dow index performance since around 1900.
100 Years of Treasury Bond Interest Rate History
Stock Market Average Annual Return Since 19xx: Investor returns for the most recent 5, 10, 20, etc. years.

Copyright © 2020. Last modified: 9/4/2020

Share This Article

To share via Facebook, Twitter, Pinterest, etc., see below except on mobile devices (where you share in the normal way).

Archives