2025 – A Quarter Century of Returns
With the start of a new year, we are closing out a quarter century which saw some of the worst bear markets since the 1930s. I have to confess that I was only beginning my years in college when the new Millennium began. But I remember well reading the headlines in high school about the technology revolution and then hearing about the accounting scandals that helped unravel some of the most successful companies of the day. That was just the beginning of this period of time we’re thinking about. The bear markets that followed the DOT.com implosion included the financial crisis of 2008, the COVID-19 pandemic, and the reaction to runaway inflation caused by excessive government stimulus in 2022. These bear markets saw the S&P 500 decline by 49%, 56%, 33%, and 25% respectively.
But why begin a new year thinking about such grim history? Well, in that same period of time the value of the S&P 500 grew from 1,469 to 5,800. The cash dividend of the S&P 500 in 1999 was $16.69. It looks like at the end of 2024 it will be around $76. Inflation measured by the CPI grew from 168 to 315.3 in September of this year, barely doubling. The cash dividend of the S&P 500 increased 4 and a half times. It can be hard to hold in our mind the reality of regular declines in the values of companies and their appreciation and growth in earnings at the same time.
How can that be? When we hold shares of companies over time, we are subjecting ourselves to the inevitable ups and downs precipitated by the events of the day. But the fundament strength and innovative capacities of the great companies have historically been, in the long run, superior to the panic that overwhelms the stock market from time to time. It is good to be reminded that the real VALUE of a company is not the same thing as its stock’s PRICE in a downturn.
This is no prediction of future events nor a recommendation. Rather, I’m hoping it simply reminds us of why owning great companies for the long run is a solid basis for a financial and retirement plan. Does all this sound familiar? I hope so. In our reviews this year we’ll revisit your plan, your allocation, adjust your goals and dreams as needed, and reinforce the reasons great companies prevail over time.
Any opinions are those of Landon Vick and not necessarily those of RJFS or Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete; it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decisions.
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