Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks again for having me.
Brandy Auterson-Hurst:
So Nate, when investors think about long-term stock market returns, what’s important to understand right now?
Nate Kreinbrink:
Well, one thing that we find helpful is looking at long-term returns through the lens of rolling 20-year periods, which is what we have here on the chart that I brought along today.
What we’re looking at here is the S&P 500’s 20-year compounded returns going back to the 1940s. What it is, investors would have earned if they would have stayed invested in the S&P 500 for any of those 20-year stretches throughout history. Now, in the middle of there, that yellow dash line represents the long-term average, which comes out to about 7% per year.
There were periods like the 1990s when the returns were well above this average, and then also stretches like the 1970s, or following the financial crisis, when returns were much lower. One thing to notice is that these returns do tend to move in cycles, which makes sense since the drivers of stock returns like valuations, earnings, growth, and economic conditions are also cyclical as well.
Brandy Auterson-Hurst:
Okay. What should investors take away from this today?
Nate Kreinbrink:
Well, currently the 20-year return is sitting at about 8.8%, which is slightly above the long-term average. This would suggest that we’re at about the midpoint of the current 20-year market cycle. With valuations at the moment relatively high, it’s possible that we’ve seen the peak. But as history has also shown that we’ve seen there on the chart, is that there’s also potential for some additional upside as well.
Brandy Auterson-Hurst:
All right, Nate, thanks for your insight today.
Nate Kreinbrink:
Not a problem. Thanks for having me.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.