You may not have heard much about it, but we’ve just experienced one of the greatest bull markets in history. From March 9, 2009, to March 9, 2010, the S&P 500 index of large-company stocks gained 69 percent. Counting reinvested dividends, funds that track the index have posted 70 percent gains in the past 12 months.
To put that in perspective, Morningstar has records of the U.S. stock market going back to 1926. No calendar year has come close to a 70 percent return. The best year was 1933, in the midst of the Great Depression, when a comparable index gained 54 percent.
Was the 2009-2010 stock market surge a reaction to the prior bear market? Of course. Stocks are still well below their peak levels of 2007.
A more pertinent question is, What will happen in the future? No one knows, but history offers some encouragement. If you had invested in the broad market in early 1934, after the boom year, you would have suffered a slight loss in 1934. Going forward, though, stocks posted gains in 14 of the next 19 years. For the entire 20-year period, 1934 through 1953, which included years of Depression, World War II and the Korean War, large-company stocks posted a very satisfactory gain of 10.7 percent a year.
There’s no guarantee history will repeat itself but at least you can see that patient investors have prospered, even in turbulent times.
