Before the onset of the market weakness in the early part of last week and the end of the prior week, S&P Dow Jones Indices released a report highlighting rolling 10-year annualized returns for the S&P 500 Index. The report seems prompted by a response Warren Buffett made to a question on timing the market. Buffett noted he was not a market timer and simply responded, "Stocks are going to be higher, and perhaps a lot higher, 10 years from now. I am not smart enough to pick times to get in and get out."
In the report, S&P notes,
- "Since 1947, the S&P 500’s price return was up in 72% of calendar years. Add in dividends reinvested and that batting average jumped to 80%."
- "And if one is worried that the S&P 500 has gone too far since the conclusion of the 2007-09 mega-meltdown bear market, consider that the rolling 10-year CAGR through Q2 2015 was +7.9%, nearly 400 basis points below the long-term average."
- "...there have been times when things didn’t work out too well for investors, but these times were few and isolated. Of the 278 quarters of rolling 10-year CAGRs from Q1 1946 through Q2 2015, only eight were negative, and they all occurred between Q4 2008 and Q3 2010."
|From The Blog of HORAN Capital Advisors|
Source: S&P Dow Jones Indices
The S&P report contains additional detail on sector returns going back to 1990 and investors should find the entire report a worthwhile read. One sector highlight noted in the report is the fact, "...each sector recorded very high monthly 10-year CAGR batting averages, or frequencies of positive observations, from 100% for consumer staples, energy, materials and utilities, to 79% for telecom services and 67% for financials. The S&P 500’s average was 87%."
In short, timing the market can be a difficult endeavor for many investors, Last week's heightened market volatility is an example of this, especially for those who sold out of stocks on Tuesday.
The Wisdom of Warren
S&P Dow Jones Indices
By: Sam Stovall, U.S. Equity Strategist
August 17, 2015