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Dec. 20 2009 - 11:43 pm | 134 views | 1 recommendation | 1 comment

The ’00s: The biggest loser of all for stocks

A stock market trader gestures during trading ...

Image by AFP/Getty Images via Daylife

First, the good news: In the roaring 2000s, stocks have turned in the worst performance of  the last two centuries. The bad news? If you adjust for inflation, the performance is worse. Much worse, the Wall Street Journal reports:

In nearly 200 years of recorded stock-market history, no calendar decade has seen such a dismal performance as the 2000s.

Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.

via For Stocks, the Worst Decade Ever – WSJ.com.

The WSJ does some great number-crunching to drive home just how poorly stocks have performed, but fails to supply a few good graphics to hammer the points. and today added interactive graphics to hammer home its points. In addition, I supply a few other visuals at the end of this post.

But first, a question: Is it really fair to compare the first ten years of this century to another set of ten years? Isn’t that pretty random? Why not compare the performance of the ’00s to the peak and trough performance of the Depression era stock market? The WSJ thought the comparison worthwhile and, lucky us, the ’00s don’t look quite as bad as peak to trough when compared to the late 1920s through the late 1930s. But adjust for inflation, and it turns out that this decade is indeed the biggest loser of all:

Since the end of 1999, the Standard & Poor’s 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University. His data use dividend estimates for 2009 and the consumer price index for the 12 months through November.

Comments from readers continue the bleak theme: One noted that a decade’s worth of jobs had been wiped out (true). Another noted that the return on the Dow Jones Industrial Average would be even more devastating if the editors hadn’t booted out losers:

Imagine what might have happened to your original investment if the lame horses had not been shot and replaced with other stallions:

Eastman Kodak: 80 then, 4 now.

Goodyear: 58 then, 14 now.

International Paper: 58 then, 26 now.

General Motors: 80 then, 0 now.

Other stocks from that time are not in the Dow now due to mergers and takeovers: Allied Signal; Phillip Morris; Union Carbide; Sears. New “fast” horses were added: Intel, Microsoft, Chevron, Cisco, Kraft, Travelers.

And don’t forget the AIG in and out!

We should be grateful that Fannie Mae and Freddie Mac were never part of the Dow.

And now, for the graphic part of our story.

worse decade_nyse

The NYSE performance from the end of 1999 thru November 2009

worst decade_nasdaq_volume

The tech-heavy Nasdaq turned in an even weaker performance than the NYSE.

worst decade_dow nominal and adjusted

On an inflation-adjusted basis (blue line), the Dow Industrials are back to 1966. (Black line shows nominal returns.)

Top two graphics via marketwatch.com. Bottom graphic via crossingwallstreet.com (h/t ritholtz.com)


1 Total Comment
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  1. collapse expand

    Ms. Miller,

    You and the WSJ are quite correct. This is exactly why the economic regulatory agencies in Washington have created conditions favorable to bubbles, Ponzi schemes, and other financial shell games, where else would people invest their money a get a good return? Not in the stocks or bonds!

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    I am a financial writer and have worked for or contributed to a number of news publishers. As the song goes, "some are dead and some are living, but in my life, I have loved them all" -- Knight-Ridder Financial, USA Today, Quick Nikkei News, and Barron's -- to name a few. I am grateful to Wall Street for creating a spectacular market smash-up based on the mortgage securities market, my first beat. I'm ever so much more popular at dinner parties these days. I hope you enjoy my blog, it marks my return from the mommy track. There's no tantrum I can't handle.

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