Ugly long-term charts that Wall Street doesn’t want us to see. And now US stocks are infected too.
How well does a buy-and-hold strategy work in the stock market over the long term – as measured in years and decades? In the largest markets around the world, it has crushed investors. There are two exceptions: the US and India. And the US is infected too.
The Everything Bubble in the US, a period of nearly 10 years when just about all asset classes have skyrocketed, was perhaps the most magnificent bubble the world as ever seen. But it peaked in 2018 and has since given up some of its gains to the wailing and gnashing of teeth on Wall Street. So it behooves us to see how this has turned out in the other major markets, and how it might turn out in the US.
The results and charts below exclude the effects of dividends, which would have increased returns or rather lessened the losses; and they exclude the impact of inflation which would have decreased “real” returns and increased “real” losses.
How well does a buy-and-hold strategy work in the stock market over the long term – as measured in years and decades? In the largest markets around the world, it has crushed investors. There are two exceptions: the US and India. And the US is infected too.
The Everything Bubble in the US, a period of nearly 10 years when just about all asset classes have skyrocketed, was perhaps the most magnificent bubble the world as ever seen. But it peaked in 2018 and has since given up some of its gains to the wailing and gnashing of teeth on Wall Street. So it behooves us to see how this has turned out in the other major markets, and how it might turn out in the US.
The results and charts below exclude the effects of dividends, which would have increased returns or rather lessened the losses; and they exclude the impact of inflation which would have decreased “real” returns and increased “real” losses.
Buy & Hold in the USA: So far, so good.
The S&P 500 fell 6.2% in 2018, its first annual decline in a decade. The swoon came in the last three months, with the index falling 14.8% from the peak at the end of September.
Buy-and-hold results: If you bought an index fund at the dot.com peak in March 2000, and held it until today, you would have made 64% in 19 years.
Buy & Hold in Canada, been a drag.
The Canadian stock index TSX fell 11.6% in 2018. It has moved sharply up and down for an entire decade to end up 5% below where it had been in June 2008:
Buy & Hold in China, oh my!
Buy-and-hold did a magic job in China. The Shanghai Composite Index dropped 24.6% in 2018, closing the year at 2,494. That’s quite an accomplishment. The index is down 52% from its last bubble-peak on June 12, 2015, and down 59% from its all-time bubble-peak in October 2007. It’s now back where it had first been in December 2006.
Here’s the magnificent double-bubble and the destruction it has wreaked on buy-and-hold investors. Note that the index would have to skyrocket by 150% just to get back to where it had been at the peak in 2007:
Buy & Hold in Japan, 3 decades of destruction
The Japanese stock market is the modern record-breaker in terms of buy & hold destruction: It’s already measured in decades, and it’s still going on.
The Nikkei 225 dropped 12.1% to 20,015 in 2018 and is down 18% from its 52-week high. But the historical high of the Nikkei was 38,951 in December 1989. The index is still down 49% from that peak nearly three decades ago, and is back where it had first been in February 1987, 31 years ago when many people working in finance today hadn’t even been born.
Over the past 20 years, Japan had relatively little inflation, and so the soothing veil, finely woven out of the methodical destruction of the purchasing power of the currency, has not been thrown over the index. To get back to its peak in 1989, the index would have to soar 95%:
by Wolf Richter, Wolf Street | Read more:
Images: Wolf Street
The S&P 500 fell 6.2% in 2018, its first annual decline in a decade. The swoon came in the last three months, with the index falling 14.8% from the peak at the end of September.
Buy-and-hold results: If you bought an index fund at the dot.com peak in March 2000, and held it until today, you would have made 64% in 19 years.
Buy & Hold in Canada, been a drag.
The Canadian stock index TSX fell 11.6% in 2018. It has moved sharply up and down for an entire decade to end up 5% below where it had been in June 2008:
Buy & Hold in China, oh my!
Buy-and-hold did a magic job in China. The Shanghai Composite Index dropped 24.6% in 2018, closing the year at 2,494. That’s quite an accomplishment. The index is down 52% from its last bubble-peak on June 12, 2015, and down 59% from its all-time bubble-peak in October 2007. It’s now back where it had first been in December 2006.
Here’s the magnificent double-bubble and the destruction it has wreaked on buy-and-hold investors. Note that the index would have to skyrocket by 150% just to get back to where it had been at the peak in 2007:
Buy & Hold in Japan, 3 decades of destruction
The Japanese stock market is the modern record-breaker in terms of buy & hold destruction: It’s already measured in decades, and it’s still going on.
The Nikkei 225 dropped 12.1% to 20,015 in 2018 and is down 18% from its 52-week high. But the historical high of the Nikkei was 38,951 in December 1989. The index is still down 49% from that peak nearly three decades ago, and is back where it had first been in February 1987, 31 years ago when many people working in finance today hadn’t even been born.
Over the past 20 years, Japan had relatively little inflation, and so the soothing veil, finely woven out of the methodical destruction of the purchasing power of the currency, has not been thrown over the index. To get back to its peak in 1989, the index would have to soar 95%:
by Wolf Richter, Wolf Street | Read more:
Images: Wolf Street
