U.S. Stock Market Returns – a history from the 1870s to 2024

Note: This post was last updated on January 2, 2025 to include refreshed U.S. stock market returns up until the end of 2024. The U.S. stock market grew by +21.5% in 2024 📈 (using a real total return measurement)

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 performance of everyone’s investments is heavily swayed by the performance of the American market.

This post will cover several facts and figures about the history of U.S. stock market returns:

• What is the average return of the stock market?
• How often does the stock market go down?
• Gauging the impact of short vs. long time horizons on the likelihood of losing money in the market
• The best/worst months and decades in stock market history

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 like myself 🧐

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?

• Simple Average: the average return of the U.S. stock market has been 8.6% per year over the past ~150 years (1872 to 2024); this is the “simple” average across all years (also known as the “arithmetic” average)
• Annualized Average: the return of the U.S. stock market has been 7.1% per year on an annualized average basis, over the past ~150 years. This represents the compounded annual growth return (“CAGR”, a.k.a “geometric average”) that you would have earned if you’d invested over this whole period

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

Recent U.S. stock market returns over the past 5 years have been:

• 2024: +21.5%
• 2023: +22.1%
• 2022: -23.1%
• 2021: +20.2%
• 2020: +16.9%

Note: all figures mentioned above / shown in the chart are “real total returns”, meaning that they’ve been adjusted to include the re-investment of dividends, and have also been adjusted for the impact of inflation.

 

Distribution of Annual Returns / Likelihood of Losing Money

How often does the stock market go down?

• While the U.S. stock market has generally grown over time, we don’t always see rainbows and unicorns. The market has grown in 69% of all years, and declined in 31% of all years on record
• U.S. stock market returns in any single year can be extremely volatile. There have been 5 cases where the market declined by 30 to 40% in a single year (1917, 1931, 1937, 1974, and 2008)
• You don’t need to go back too far for evidence of losses in the stock market — in 2022, the U.S. stock market dropped by 23.1% (real total return of the S&P 500 index)

 

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.

 

• Taking a 1-year view, we see lots of red — there were plenty of years in which the market was down, and sometimes down significantly.
• As we look to longer and longer time periods (stretching our view out to 5 years, then 10 years, and finally 20 years), the range of possibilities narrows, and the chance of losing money diminishes.
• Once we zoom it out to look at returns over 20-year periods, you won’t see any more flashes of red. In other words, The U.S. stock market has never declined over any 20-year period in history.

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

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%).

Over the long run, U.S. stocks have delivered strong positive returns. However, if your investment horizon is short (0-5 years), there is a substantial likelihood that you could lose money by investing in the stock market. Therefore, for short-term savings, it’s recommended that you choose less volatile investment assets such as bonds, GICs, or high interest savings accounts — these investments offer lower reward and lower risk.

 

U.S. Stock Market Returns by Decade

Across the entire period spanning 1871 until 2024, U.S. stocks have increased at an annualized average of +4.8% per year excluding dividends, +9.3% per year including dividends, and +7.1% per year including dividends and also adjusting for inflation (i.e., the real total return CAGR).

The stock market can decline even over a relatively long time period of 10 years. For example, an investor in the U.S. stock market during the period of 2000 to 2009 would have faced an average loss of 3.4% per year during that decade. This loss was due to the burst of the dot-com bubble in the early 2000s, and the sub-prime financial crisis of 2008.

 

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 history came in 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, 2024 (without buying or selling during that 55-year period), your investment would have grown to ~$288k before considering inflation, or ~$34k 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 usual, legendary investor 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.

If you liked this post, you may be interested in some of my other tools and data essays:

• Free spreadsheets and tools for budgeting, investment portfolio tracking, and more
• Tracking Canadian Housing Market Affordability (1999 to 2024)
• The Wealth of Nations: income, cost of living, and purchasing power for 110 countries
• Investment returns by asset class (1985 to 2024)

***
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 1: 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.

Note 2: All values shown in this post are real total returns (returns including dividends and adjusting for the impact of inflation), unless explicitly stated otherwise.

That’s all for now! Thanks for joining me on this data deep dive 🧐. Feel free to drop any comments or questions below.