NYTimes columnist Floyd Norris has discovered a freakish cycle in S&P 500 real returns over the past 70 years that makes the rest of this decade look rather gloomy.
Calculating overall gains after inflation, he found that since 1980 stocks have moved in a nearly identical,15-years-up/15-years-down pattern to their performance between 1943 and 1980.
In June 1964, the real return over the previous 15 years averaged 15.6 per cent a year, the highest that figure had ever been. The stock market did not begin to fall then, but it could no longer maintain the torrid pace, and the 15-year return figures began to decline.
While between 1984 and 1999 total compound annual return was more than 15 per cent, since 1996, overall returns are just 3 per cent.
If the 15/15 cycle holds, then we have at least four more years of negative overall returns. Whatever gains stocks make in the short-term will be short-lived.
[credit provider=”NYTimes” url=”http://www.nytimes.com/interactive/2012/01/06/business/Similar-Cycles-for-Stocks.html?ref=economy”]