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Stock Market History Lesson : Good Times Follow Lean Times |
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So far the 2000s have proved to be a disappointing decade for investors. A bear market of over two years began the decade and the worst stock market decline since the Great Depression closed it. U.S. stocks, as measured by the Standard & Poor's 500 Stocks Index, have produced a negative return to investors over the past 10 years. However, a strong rally that began in March 2009 has lifted the market well above its lowest point of the decade. Can that continue?
Jeremy Siegel, a finance professor and author of "Stocks for the Long Run," says that similar historical periods indicate the stock market could do well during the next decade. There have been only three other 10-year declines in U.S. stocks prior to the current downtrend, he told The Financial Times.
Stocks posted 10-year drops in the periods ended in 1920, 1974, and 1978, he said. However, stocks posted annualized returns of 8 percent to 13 percent in the 10-year periods that followed those losing decades. Mutual fund managers Tweedy, Browne Co. noted in their recent semi-annual report that the latest bear market in 2008 was similar to the 1973-74 bear market when U.S. stocks lost about 44 percent. However, the next 10 years were a terrific period for investors. "Over the next 10 years, the S&P 500 and the MSCI World Index compounded nominally at roughly 15 per-cent and 14 percent, respectively, per year despite a ravaging inflation during the Carter Administration that drove interest rates to as high as 21 percent in 1980," they wrote.
Investors should ignore the inevitable short-term reversals to come and instead focus on the potential for healthy long-term profits.
©OSB Financial Services, INC rights reserves.Information has been obtained form sources believed to be reliable, but its accuracy and completeness and the options based thereon, are not guaranteed. Always consult your a financial adviser and prospectus before making an investment
©2009, Kelly Ruggles Web site
Kelly C. Ruggles is a fee-based financial planner located in Spokane.
Kelly C. Ruggles, President of American Reliance Group, Inc., a registered investment advisor.
Kelly Ruggles is the author of "The Financial Playbook" for Retirement
Kelly C. Ruggles does not intend to provide personalized investment advice through this publication and does not represent the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions
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