Can the gains continue when the S&P 500 returned 33% in 2019 and 256% for the decade?
Say what you will about new year’s resolutions, but last year, letting a boring old S&P 500-tracking index fund do its work was one of the best investment decisions around.
Including dividend reinvestment, the S&P 500 SPX, +0.24% returned 33% in 2019, outperforming virtually every national index and very nearly every investment strategy. For the decade, according to Deutsche Bank, the S&P 500 returned a cool 256%, and the tech-heavy Nasdaq Composite COMP, +0.55% returned 347%.Tim Duy, a University of Oregon professor who closely tracks the Federal Reserve, plotted the return of the S&P 500 on a logarithmic scale to show that the current gains are nothing like the acceleration from the late 1990s.
“This doesn’t surprise me as I think fears of financial excess are overplayed, effectively a case of fighting the last war,” he writes. Duy also notes the level shift down since the 2007-09 recession, which he says is suggestive that a less optimistic view of the world, has already been priced into the market.
Duy also examined S&P 500 performance after the first Fed rate increase of the cycle, and finds the current performance in line with the pre-2015 average. Duy says the current performance is not “an unexplainable deviation from fundamentals” but rather an expected recovery from excessive pessimism.New York City Mayor Bill de Blasio says Domino’s Pizza DPZ, -0.10% exploited those who celebrated the new year in Times Square by charging $30 for pizza.
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