U.S. Stock Market Returns – a history from the 1870s to 2023

 

Note: This post was last updated on February 28th, 2024 to include refreshed U.S. stock market returns up until the end of 2023. The U.S. stock market returned +22.1% in 2023 💸

From Canada to Chile, Barcelona to Bali — investors around the globe pay close attention to the U.S. stock market. With the U.S. generating ~25% of global GDP,  and U.S. companies weighing in at ~60% of global stock markets, the long-term performance of all of our investments is heavily influenced by the performance of the U.S. market.

This post will cover a few facts and figures on the history of U.S. stock market returns:

Understanding historical stock market returns can help to inform your financial plans, from planning for retirement, or figuring out whether it makes more sense to rent or buy your home. Plus, it’s plenty of fun for data geeks 🧐

Throughout this post we’ll be relying on a fantastic data set released and maintained by Professor Robert Shiller, giving us data on U.S. stock market returns all the way back to the 1870s — a data set covering more than 150 years.

Onto the good stuff!

 

U.S. Stock Market Returns by Year

What is the average annual return of the U.S. stock market?

This showcases why many financial planners tend to assume returns of 5% to 8% per year in the stock market.

Note: these figures are “real total returns”, meaning that they’ve been adjusted to include the re-investment of dividends, and have also been adjusted for inflation.

 

Distribution of Annual Returns

How often does the stock market go down?


 

Buy, Hold… Profit?

The wild swings of the market are reduced if we start to look at time horizons that are longer than a single year.

In the animation below, you can see how U.S. stock market returns have fared when we look at 1 / 5 / 10 / 20 year rolling periods.


 

And down below you’ll find the same chart, but this time shown as a static picture.

To summarize: while the range of returns across 1-year periods has varied significantly (from negative 37.0% to +53.2%), the annualized returns across 20-year periods have a much tighter range (from +0.5% to +13.2%).

In the long run, U.S. stocks have delivered strong returns. However, if your investment horizon is short (0-5 years), your savings are likely better suited towards less volatile assets such as bonds, GICs, or high interest savings accounts.

 

U.S. Stock Market Returns by Decade

Across the entire period spanning 1871 until 2023, U.S. stocks have increased at +4.7% per year excluding dividends, +9.2% per year including dividends, and +6.9% per year including dividends and also adjusting for inflation.

 

The Best and Worst Months in Stock Market History

The table below lists the 20 months on record with the highest returns, and the 20 months with the lowest returns (without adjusting for dividends or inflation).

A familiar story: in the short-term, the stock market is far from predictable.

The best month in stock market history was August 1932, when the market gained 50.3% in a single month!

On the other hand, the worst month in stock market history was November 1929, with a decline of 26.5%. The worst month in recent memory was October 2008 (during the depths of the Great Recession), when the stock market dropped by 16.9%.

 

$1,000 — Then and Now

If you had invested $1,000 in the U.S. stock market on Dec. 31st, 1969 and held the investment until Dec. 31, 2023 (without buying or selling during that 54-year period), your investment would have grown to ~$230k before inflation, or ~$28k after adjusting for inflation.

Historically, buying and holding (and potentially forgeting about the investment entirely) has been a simple and straightforward way to build wealth.

 

Final Thoughts

If you’re looking to make a quick buck by jumping in and out of the market, quite often you’ll find yourself on the losing end of things. Over short time periods, there’s no telling if the market will go up, down, or sideways.

However, if you have the patience and fortitude to hold onto your investments for 10 or 20+ years, your prospects become much brighter. You’ll ride out the short-term noise and benefit from the long-term upwards trend 🚀.

As always, Warren Buffet put it best: “the stock market is a device for transferring money from the impatient to the patient”.

That being said! If you’d like to try your hand at beating the performance of a simple buy-and-hold strategy, I invite you to play this simple market timing simulator game.
 

***
For the data-heads, click here to download an excel file which contains all of the underlying data on U.S. stock market returns, along with the charts shown in this post.

Data sources:

Robert Shiller U.S. stock market data

Yahoo finance S&P 500 historical data

FRED U.S. CPI (inflation) data

Note: for the purposes of this post, the “U.S. stock market” refers to the S&P Composite index from 1871 to 1957, and the S&P 500 index from 1957 until today, which is aligned with the definition used by Professor Shiller.

 

       

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Comment Section

102 Responses to “U.S. Stock Market Returns – a history from the 1870s to 2023”

  1. […] The Measure of a Plan has a great set of graphics on U.S. stock market returns from the 1870s to 2022. In short, even including the worst years in history (with losses of more than 30%), the market generates a long-term positive return of around 7% per year. […]

  2. […] by year returns for U.S. stocks from 1872 to 2022. A timely reminder that stocks go up a lot more than they fall in […]

  3. […] answer every one personally. Questions and answers are edited for length and clarity.Year by year returns for U.S. stocks from 1872 to 2022. A timely reminder that stocks go up a lot more than they fall in price.Here’s […]

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  9. […] combining bull markets with bear markets and market corrections that produced positive returns in consecutive 20-year holding periods since the late 1880s. The stock market has never generated a negative return during any 20-year […]

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  11. […] Depending on their personal and family health histories, most 70-year-old retirees have at least a 10-year time horizon, but they should plan based on a 20-year time horizon (longer with a younger spouse). Even at 10 years, retirees have little to fear from a market downturn. Since 1932, the stock market has never generated a negative return over any 10-year holding period. […]

  12. […] includes the laws of probability and compounding. The stock market tends to rise over time, and is up two of every three years, on average. It returned an average of 12.3% from 1926 through 2021, almost twice that of a bond […]

  13. […] graph illustrates the S&P 500 success over the last 150 years. This shows the major stock market […]

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  15. […] 11. While the U.S. stock market has generally trended upwards over time (6.9% per year after inflation and including dividends) from 1872 to 2022, the market from year to year can be volatile. In this time frame, the market has grown in 69% of the years, and declined in 31% of years on record. (with 5 cases of declines by 30 to 40% in a year). (TheMeasureofPlan) […]

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