Adam Shell: Wall Street Will Limp Through Year
After the stock market bubble burst, Wall Street pundits predicted the 2000s would usher in a "low-return" world.
A "no-return world" would have been more accurate.
It's the first day of trading in 2006 and, despite three up years in a row and a modest 3% gain last year, a buy-and-hold investor who invested $10,000 in the Standard & Poor's 500-stock index on Dec. 31, 1999, would now have an investment worth $8,493, excluding dividends. That equates to an annualized loss of 2.7%.
Things, of course, look much better if you don't factor in the bear market years of 2000 (-10.1%), 2001 (-13.0%) and 2002 (-23.4%): The same $10,000 investment would be worth $14,190, which amounts to an average annual gain of 6.0%.
Unfortunately, there are no do-overs on Wall Street. The bear market was real. So are the resulting subpar profits stock investors have "enjoyed" since the end of the go-go '90s.
This isn't your father's bull market. The '80s were great. The '90s were even better. But the '00s so far have been pretty much a dud.
"The comparison of the 2000s (to the prior two decades) will not be favorable from a historical perspective," says James Stack, president of InvesTech Research.
It's unlikely, for example, that the Dow Jones industrial average, which declined 0.6% in 2005, will be able to come anywhere near its 228% gain in the '80s and its 318% gain in the '90s. The blue-chip barometer is actually down 6.8% since the end of 1999.
And playing catch-up won't be easy. Respected market historian and statistician Roger Ibbotson of Ibbotson Associates is forecasting annual gains of 9% for stocks in coming years, below the 10.4% historical average. If he's right, it's almost assured that the '00s will go down not as a decade of greed but rather a decade of need -- to forget.
...
Investors hoping for a replay of the '80s and '90s were probably asking for too much anyway, adds Hugh Johnson, chief investment officer at Johnson Illington Advisors.
"The prior two decades were unusual," says Johnson. "These are far more normal times, but it could still be a rewarding time for investors. Returns are likely to be between 6% and 9%, which is not bad."
Just not as exciting as the 20% annual gains made famous in the '80s and '90s.
A "no-return world" would have been more accurate.
It's the first day of trading in 2006 and, despite three up years in a row and a modest 3% gain last year, a buy-and-hold investor who invested $10,000 in the Standard & Poor's 500-stock index on Dec. 31, 1999, would now have an investment worth $8,493, excluding dividends. That equates to an annualized loss of 2.7%.
Things, of course, look much better if you don't factor in the bear market years of 2000 (-10.1%), 2001 (-13.0%) and 2002 (-23.4%): The same $10,000 investment would be worth $14,190, which amounts to an average annual gain of 6.0%.
Unfortunately, there are no do-overs on Wall Street. The bear market was real. So are the resulting subpar profits stock investors have "enjoyed" since the end of the go-go '90s.
This isn't your father's bull market. The '80s were great. The '90s were even better. But the '00s so far have been pretty much a dud.
"The comparison of the 2000s (to the prior two decades) will not be favorable from a historical perspective," says James Stack, president of InvesTech Research.
It's unlikely, for example, that the Dow Jones industrial average, which declined 0.6% in 2005, will be able to come anywhere near its 228% gain in the '80s and its 318% gain in the '90s. The blue-chip barometer is actually down 6.8% since the end of 1999.
And playing catch-up won't be easy. Respected market historian and statistician Roger Ibbotson of Ibbotson Associates is forecasting annual gains of 9% for stocks in coming years, below the 10.4% historical average. If he's right, it's almost assured that the '00s will go down not as a decade of greed but rather a decade of need -- to forget.
...
Investors hoping for a replay of the '80s and '90s were probably asking for too much anyway, adds Hugh Johnson, chief investment officer at Johnson Illington Advisors.
"The prior two decades were unusual," says Johnson. "These are far more normal times, but it could still be a rewarding time for investors. Returns are likely to be between 6% and 9%, which is not bad."
Just not as exciting as the 20% annual gains made famous in the '80s and '90s.