Letter to Clients: What Can You (Reasonably) Expect from the Stock Market?

John Dorfman


Dorfman Value Bulletin

December 23, 2020


Dear Clients:

What can people expect from the stock market?  The unexpected, at any given time. But longer-term there have been patterns.

Periods (ending Dec. 22, 2020) Compound Annual Total Return, including dividends
70 years 10.98%
50 years 10.96%
30 years 10.61%
10 years 13.65%

Returns are for the S&P 500 for the past 30 years. The 50-year and 70-year figures are for the Dow Jones Industrial Average.  Source: Ned Davis Research


I don’t expect the next ten years to be as good as the past ten, but I think there’s a reasonable chance the market will achieve a 10% compound return. Of course, there are no guarantees. Here’s how returns have varied by decade.


1920s 13.92% 1930s 0.31%
1940s 8.29% 1950s 18.85%
1960s 5.18% 1970s 5.07%
1980s 18.30% 1990s 18.19%
2000s 1.29% 2010s 13.24%

Figures are for the Dow Jones Industrial Average with dividends reinvested. Source: Ned Davis Research.

The best returns were in the 1950s (the Eisenhower era), the 1980s (the Reagan era) and the 1990s (the Clinton era).  The worst decades were the 1930s and the 2000-oughts, raked by the Great Recession of 2007-2009 and the Dot-Com Bust of 2000-2002.  We can never guarantee what a client may make, and we may do better or worse than the averages, but we think history gives you some idea of what to expect.  Best Wishes to everyone for a healthy and prosperous 2021!

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