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Markets in a Minute

The Pyramid of Equity Returns: Almost 200 Years of U.S. Stock Performance

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Historical Stock Market Returns

Historical Stock Market Returns

This Markets in a Minute Chart is available as a poster.

Historical Stock Market Returns

After the fastest bear market drop in history, the S&P 500 rallied and now has a year-to-date total return of -4.7%. The year is not over, but in the context of history, is this in line with what’s considered a “normal” return, or is it more of an outlier?

In today’s Markets in a Minute chart from New York Life Investments, we show the distribution of U.S. equity returns over almost 200 years.

Total Returns By Year

The chart shows total annual returns, which assumes that dividends and other cash distributions are reinvested back into the index.

It’s also important to note that different indexes and data collection methods are used over the timeframe. From 1825-1925, numbers come from researchers at Yale University and Pennsylvania State University. They collected price and dividend data for almost all stocks listed on the New York Stock Exchange during its early history.

From 1926-1956, returns are from the S&P 90, the S&P 500’s predecessor. Finally, from 1957 to date, returns are based on the S&P 500.

Here are historical stock market returns by year:

YearTotal Return
1825-10.46%
18260.81%
1827-3.28%
1828-15.13%
182913.54%
183030.14%
1831-15.35%
183211.62%
1833-3.16%
183411.75%
1835-3.91%
18365.92%
1837-15.91%
183818.47%
1839-21.34%
18406.54%
1841-18.66%
18428.11%
184346.34%
18449.66%
1845-7.46%
184626.57%
184713.20%
184810.45%
184915.40%
185014.21%
1851-1.35%
185222.59%
1853-4.03%
1854-18.35%
185518.34%
18565.49%
1857-20.82%
185813.22%
18592.24%
1860-1.53%
1861-0.52%
186252.75%
186344.47%
186414.71%
18652.64%
18664.85%
18671.88%
1868-
18691.33%
18702.77%
18719.20%
18726.83%
1873-11.19%
18741.70%
18751.89%
1876-6.45%
18777.05%
187816.04%
187957.10%
188025.12%
18817.36%
1882-4.22%
1883-9.39%
1884-18.47%
188550.85%
188616.69%
1887-7.70%
18886.45%
18898.77%
1890-6.59%
18917.74%
189214.79%
1893-12.33%
18941.94%
18956.56%
18964.86%
189718.41%
189816.38%
18997.89%
190022.97%
190129.26%
19029.44%
1903-8.53%
190419.66%
190510.67%
19063.10%
1907-21.79%
190834.56%
190922.99%
1910-10.94%
19117.37%
19125.30%
1913-9.32%
1914-3.25%
191521.73%
19167.19%
1917-16.44%
191811.27%
191916.09%
1920-15.02%
192111.02%
192226.72%
19233.90%
192425.77%
192529.12%
192611.62%
192737.49%
192843.61%
1929-8.42%
1930-24.90%
1931-43.34%
1932-8.19%
193353.99%
1934-1.44%
193547.67%
193633.92%
1937-35.03%
193831.12%
1939-0.41%
1940-9.78%
1941-11.59%
194220.34%
194325.90%
194419.75%
194536.44%
1946-8.07%
19475.71%
19485.50%
194918.79%
195031.71%
195124.02%
195218.37%
1953-0.99%
195452.62%
195531.56%
19566.56%
1957-10.78%
195843.36%
195911.96%
19600.47%
196126.89%
1962-8.73%
196322.80%
196416.48%
196512.45%
1966-10.06%
196723.98%
196811.06%
1969-8.50%
19704.01%
197114.31%
197218.98%
1973-14.66%
1974-26.47%
197537.20%
197623.84%
1977-7.18%
19786.56%
197918.44%
198032.42%
1981-4.91%
198221.55%
198322.56%
19846.27%
198531.73%
198618.67%
19875.25%
198816.61%
198931.69%
1990-3.10%
199130.47%
19927.62%
199310.08%
19941.32%
199537.58%
199622.96%
199733.36%
199828.58%
199921.04%
2000-9.10%
2001-11.89%
2002-22.10%
200328.68%
200410.88%
20054.91%
200615.79%
20075.49%
2008-37.00%
200926.46%
201015.06%
20112.11%
201216.00%
201332.39%
201413.69%
20151.38%
201611.96%
201721.83%
2018-4.38%
201931.49%

Source: Journal of Financial Markets, Slickcharts. The year 1868 has insufficient data to estimate a total annual return.

U.S. equity returns roughly follow a bell curve, meaning that values cluster near a central peak and values farther from the average are less common. Historically, they have been skewed towards positive performance.

Here is how the distribution of returns stack up:

Total Annual Return (%)-50 to -30-30 to -10-10 to 1010 to 3030 to 5050+
Number of Years Within Range3237665225
Percent of Years Within Range1.5%11.9%39.2%33.5%11.3%2.6%

While extreme returns can happen, almost 40% of annual returns have fallen within the -10% to 10% range.

Recessions and Recoveries

What does it look like when more abnormal returns occur? Due to the cyclical nature of the economy, recessions tend to be followed by strong recoveries.

recession and recovery stock market returns

In 1957, the year the S&P 500 was created, the stock market saw a loss of almost 11%. Stock prices shot up by over 43% the following year, bolstered by rising credit volumes and business profits.

Most recently, the 2008 global financial crisis led to one of the largest equity losses to date. In 2009, stocks climbed by almost 27%, boosted by expectations of higher capital spending and demand as the economy recovered.

What History Tells Us

While equities can have high volatility, returns have historically followed a positively-skewed bell curve distribution. From 1825-2019, the average total annual return was 9.56%. In fact, over 70% of total annual returns have been positive over the same timeframe.

Owning stocks long-term may help investors not only beat inflation, but also build a nest egg that may sustain them throughout their retirement years.

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Markets in a Minute

The Average American’s Financial Portfolio by Account Type

From retirement plans to bank accounts, we show the percentage of an American’s financial portfolio that is typically held in each account.

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The Average American’s Financial Portfolio by Account Type

Where does the average American put their money? From retirement plans to banks, the typical financial portfolio includes a variety of accounts.

In this graphic from Morningstar, we explore what percentage of a person’s money is typically held within each account.

Breaking Down a Typical Financial Portfolio

People put the most money in employer retirement plans, which make up nearly two-fifths of the average financial portfolio. Bank accounts, which include checking, savings, and CDs, hold the second-largest percentage of people’s money.

Account Type% of Financial Portfolio
Employer retirement plan38%
Bank account23%
Brokerage/investment account14%
Traditional IRA10%
Roth IRA7%
Crypto wallet/account4%
Education savings account3%
Other1%

Source: Morningstar Voice of the Investor Report 2024, based on 1,261 U.S. respondents.

Outside of employer retirement plans and bank accounts, the average American keeps nearly 40% of their money in accounts that advisors typically help manage. For instance, people also hold a large portion of their assets in investment accounts and IRAs.

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Account Insight for Advisors

Given the large focus on retirement accounts in financial portfolios, advisors can clearly communicate how they will help investors achieve their retirement goals. Notably, Americans say that funding retirement accounts is a top financial goal in the next three years (39% of people), second only to reducing debt (40%).

Americans also say that building an emergency fund is one of their financial goals (35%), which can be supported by the money they hold in bank accounts. However, it can be helpful for advisors to educate clients on the lower return potential of savings accounts and CDs. In comparison, advisors can highlight that investment or retirement accounts can hold assets with more potential for building wealth, like mutual funds or ETFs. With this knowledge in mind, clients will be better able to balance short-term and long-term financial goals.

The survey results also highlight the importance of advisors staying up to date on emerging trends and products. People hold 4% of their money in crypto accounts on average, and nearly a quarter of people said they hold crypto assets like bitcoin. Advisors who educate themselves on these assets can more effectively answer investors’ questions.

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Markets in a Minute

5 Factors Linked to Higher Investor Engagement

Engaged investors review their goals often and are more involved in decisions, but which factors are tied to higher investor engagement?

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Partial bar chart showing the factors linked to higher investor engagement along with a picture of a man looking at a cell phone.

5 Factors Linked to Higher Investor Engagement

Imagine two investors. One investor reviews their investment goals every quarter and actively makes decisions. The second investor hasn’t reviewed their goals in over a year and doesn’t take part in any investment decisions. Are there traits that the first, more involved investor would be more likely to have?

In this graphic from Morningstar, we explore five factors that are associated with high investor engagement.

Influences on Investor Engagement

Morningstar scores their Investor Engagement Index from a low of zero to a high of 100, which indicates full engagement. In their survey, they discovered five traits that are tied to higher average engagement levels among investors.

FactorInvestor Engagement Index Score (Max = 100)
Financial advisor relationshipDon’t work with financial advisor: 63
Work with financial advisor: 70
Sustainability alignmentNo actions/alignment: 63
Some/full alignment: 74
Trust in AILow trust: 61
High trust: 74
Risk toleranceConservative: 62
Aggressive: 76
Comfort making investment decisionsLow comfort: 42
High comfort: 76

Morningstar’s Investor Engagement Index is equally weighted based on retail investors’ responses to seven questions: feeling informed about composition and performance of investments, frequency of investment portfolio review, involvement in investment decision-making, understanding of investment concepts and financial markets, frequency of goals review, clarity of investment strategy aligning to long-term goals, and frequency of engagement in financial education activities.

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On average, people who work with financial advisors, have sustainability alignment, trust AI, and have a high risk tolerance are more engaged.

The starkest contrast was that people with high comfort making investment decisions have engagement levels that are nearly two times higher than those with low comfort. In fact, people with a high comfort level were significantly more likely to say they were knowledgeable about the composition and performance of their investments (84%) vs. those with low comfort (18%).

Personalizing Experiences Based on Engagement

Advisors can consider adjusting their approach depending on an investor’s engagement level. For example, if a client has an aggressive risk tolerance this may indicate the client is more engaged. Based on this, the advisor could check if the client would prefer more frequent portfolio reviews.

On the other hand, soft skills can play a key role for those who are less engaged. People with low comfort making investment decisions indicated that the top ways their financial advisor provides value is through optimizing for growth and risk management (62%), making them feel more secure about their financial future (38%), and offering peace of mind and relief from the stress of money management (30%).

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