Stock Market Statistics

Yes, we all know that past performance is not an indication of future returns.  However, the only information that we have to make decisions on investing is from the past.  Therefore, this information is better than no information at all.

Some Important Stats on Stocks

Here are some current relevant statistics for those who want to know if they should be investing in stocks right now:

  • 30, 19 – Since 1950, the average U.S. bear market has lasted about 13 months and on average, has declined 28%. At the end of February, we were 18 months into the current downturn and U.S. stocks were off by more than 50% from their October 2007 peaks. On average, when bear markets end the return on U.S. stocks 12 months later has been about 30% and investment losses through previous bear markets were typically restored an average of 19 months thereafter (although it’s important to keep in mind that the breadth of the current decline has been worse than the average).
  • 80, 16 -When the S&P 500 is trading below fair value and inflation is at or below its long term historical average of 4.2% (conditions that exist today), the return on stocks is positive more than 80% of the time. The average one year return during these periods is about 16% versus an average loss of 7% during instances where returns were negative (less than 20% of the time).
  • 30 – On North American exchanges, more than 30% of stocks are currently trading below book value.

What These Statistics Mean

No, these statistics are not the be all and end all of investing. Nor are they to be used as a roadmap for your own investing decisions. However, they are useful in illustrating the fact that bear markets end just as our last bull market ended.

The climb will not be as drastic or sharp as the fall, but there will eventually be another bull market and stocks are surely closer to a bottom now than they are to a top.

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