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The Great Depression of 2000

Are stock market investors suffering more in the 21st Century than they did during the Great Depression of 1929?

This webpage will be updated annually after Standard and Poor's reported earnings for the previous year are available i.e., normally during April.

The conventional wisdom proclaims that the Great Depression of 1929 won't be repeated again, primarily because of social safety nets and because government bureaucrats are far too sophisticated to permit a disaster like that to occur again.

There is no doubt that the social safety nets today have eliminated much of the suffering that occurred during the Depression of 1929. However, I examined the stock market returns during the Depression of 1929, and I compared them to stock market returns of the Depression of 2000.

That convinced me that stock market investors were suffering more now than they did during the thirties and forties. From 1999 thru 2011 the inflation adjusted returns of contemporary investors were lower than the returns of our 1929 Depression era forebears, but after 2011, contemporary investors started winning.


The inflation adjusted chart above uses US Government Consumer Price Index (CPI) data for inflation, Robert Shiller's (Yale University) inflation adjusted Stock Market data after 1928, and Standard and Poor's inflation adjusted data for the S&P 500 after 1999. Dividends are included in all the data. The chart shows that at the end of 2011 our depression era forebears were ahead of contemporary investors, but after 2011 contemporary investors started winning.

Does that mean "Happy Days" are here again?

Happy Days may be here again, but think about this:

During 1945 the market gained 34.13%, excluding inflation, but including dividends.

During 1946 the market lost 8.26%, excluding inflation, but including dividends.

After that, it was straight up (with a few minor corrections) until 1973.

Also, consider the fact that the greatest governmental economic stimulation the world had ever seen began after 1941, but the current round of stimulation is (probably) ending.

It is extremely difficult to predict the future, but my guess is that we are not going to share the good fortune of our depression era forebears anytime soon, but I hope I'm wrong.

We'll see ...

Dividend adjusted returns NOT adjusted for inflation

88.97% Total 16 Year return since 1999 for contemporary investors
4.06% Annual 16 Year return since 1999 for contemporary investors

23.69% Total 16 Year return since 1928 for our depression era forebears
1.34% Annual 16 Year return since 1928 for our depression era forebears

Dividend adjusted returns ALSO adjusted for inflation

34.46% Total 16 Year return since 1999 for contemporary investors
1.87% Annual 16 Year return since 1999 for contemporary investors

18.83% Total 16 Year return since 1928 for our depression era forebears
1.08% Annual 16 Year return since 1928 for our depression era forebears

Data Sources

Robert Shiller of Yale University and author of Irrational Exuberance etc. posted data online that includes S&P Composite Index values, earnings and dividends since 1871. Shiller's S&P Composite Index morphed into the S&P 500 during the 1950s.

I used Shiller's data to show that it took until 1943 to break even if you had bought & held stock at the end of 1928. For example, if you had invested $100,000 in Shiller's S&P Composite Index at the end of 1928, and if you had reinvested your dividends and held thru 1943, then you would have had a profit of $3,087 at the end of 1943 i.e., you would have had a stock portfolio worth $103,087.

That's an annualized return, including dividends, of 0.20% per year over a 15 year period. That return has not been adjusted for inflation, but TOTAL inflation over the 15 year period after 1928 was only 1.75%. See the Consumer Price Index table below, and compare the inflation of the 1930s and 40s to the inflation after 1999.

Consumer Price Index
Bureau of Labor Statistics
US Department of Labor
http://www.bls.gov/cpi/tables.htm