FYI: Will the stock market’s real rate of return please stand up? It’s an important question. Depending on your frame of reference, the U.S. stock market is either performing fantastically or dismally.
For example, the dividend-adjusted S&P 500 SPX, -2.59% has an annualized real (inflation-adjusted) return of 26.5% this year through Aug. 19 — including a full percentage point increase on Monday of this week.
Not bad. If we extrapolate that return into the future, we can all retire early. Extend your frame of reference by just a few months, though, and a far different picture emerges. The S&P 500’s dividend-adjusted and inflation-adjusted return over the past 12 months is 2.4% — less than a tenth as much as its year-to-date performance. Extrapolate that return and we will have to postpone our retirement for many years.
Nor is this stark contrast just a product of the past year’s extraordinary volatility. The U.S. market’s comparable annualized return over the past 10 years is almost triple that of the market’s trailing 20-year return — 11.7% versus 4.2%.
Regatds,
Ted
https://www.marketwatch.com/story/the-us-stock-market-right-now-is-riskier-than-you-think-2019-08-20/print
