It’s been a challenging year for Wall Street, and especially for retail investors. The uncertainties created by the coronavirus disease 2019 (COVID-19) sent the U.S. economy into a tailspin and cost the benchmark S&P 500(SNPINDEX:^GSPC)34% of its value in just a 33-calendar-day stretch. For some context, bear market declines of at least 30% in the S&P 500 have historically taken an average of 11 months to materialize.
Even though the S&P 500 has recouped everything that was lost during the coronavirus crash (and some), volatility remains well above its five-year average, as measured by the CBOE Volatility Index. This heightened volatility may well be keeping investors from putting their money to work for fear of losing some or all of their principal.
But what if I told you there is a guaranteed way to make money in the stock market, and that it doesn’t involve owning bonds.
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The one investment that’s never let long-term investors down
As investors, we’re taught one simple truth: Nothing is guaranteed. No matter how much a stock seems like a sure thing, there can always be a competitor, fiscal policy change, Act of God, or X factor that completely screws up your investment thesis. This is one of the main reasons why diversifying your investment portfolio and buying into baskets of stocks is a smart move.
We’ve watched as great companies like insurer UnitedHealth Group, warehouse club Costco Wholesale, and electric utility NextEra Energy have delivered 11 consecutive years (and counting) of positive total returns, including dividends paid. Yet none of these companies is guaranteed to go make you money over the long run.
The SPDR S&P 500 ETF is an exchange-traded fund (ETF) that nearly mirrors the performance of the S&P 500. Fund managers for this ETF charge a very nominal 0.09% annual fee on invested capital, with investors gaining access to all 500 companies in the index from a single security.
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Similar to other broad-market indexes, the S&P 500 is constantly replacing chronic underperformers whose market caps fall into small-cap territory with companies poised to outperform. One of the many criteria used to gauge inclusion into the S&P 500 is profitability. Thus, investors in the SPDR S&P 500 ETF know that the overwhelming majority of companies contained in the index will be time-tested and making money.
But it’s the rolling 20-year total returns (i.e., including dividends) of the S&P 500 that really tell the tale.
Is 101-for-101 convincing enough?
Earlier this year, financial market and economic research firm Crestmont Research released data on the 20-year rolling returns for the S&P 500 over a 101-year stretch (1919-2019). When I say “rolling returns,” I’m referring to the average annualized total return for the S&P 500 over a defined period that ends in a specific year. For example, the rolling 20-year change in 1919 takes into account the average annual total returns of the S&P 500 between 1900 and 1919 (a 20-year period). Likewise, the total return for 1985 takes into account the average annual total return for the index between 1966 and 1985. Crestmont examined the rolling 20-year total returns for all 101 years between 1919 and 2019.
The result? Every single year had a positive annualized total return. Every single year! Put in another hypothetical context, no matter when you bought into an S&P 500 tracking index since 1900, you would have made money as long as you held onto your investment for 20 years.
Image source: Getty Images.
What’s even more impressive about the S&P 500’s rolling returns is that they’re rarely marginal. Only two times over the past 101 years has the rolling 20-year total return of the S&P 500 been under 5%. By comparison, more than 40% of the time investors have basked in a rolling 20-year total return of at least 10.9%. In fact, the median 20-year annualized total return is 8.9%, which would allow investors to double their money with dividend reinvestment in just over eight years.
I get it — the stock market can be a scary place at times with equities being whipsawed by unforeseen events. But history is no liar. If you buy the SPDR S&P 500 ETF and hang onto it for 20 years, you’re going to make money.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
