For investors in the Standard & Poor's 500-stock index, and that includes just about everyone who invests in mutual funds, the first 10 years of the 21st century will go down as a lost decade.
For investors in the Standard & Poor's 500-stock index, and that includes just about everyone who invests in mutual funds, the first 10 years of the 21st century will go down as a lost decade.
Barring a stunning—indeed, almost impossible—last-minute rally, the widely tracked index is headed for its first negative decade ever.
Unless the index somehow generates a return of more of 10% by Dec. 31, the S&P 500 will end the decade in the red, according to S&P market analyst Howard Silverblatt. As of last Wednesday, the index had returned negative 1%, including dividends, since the dawn of the millennium.
In other words, people would have been better off parking their money in a savings account and collecting a miniscule interest rate rather than investing it in a mutual fund that tracks the S&P 500.
Of course, the S&P 500 was far from the worst investment choice over the past decade. The Nasdaq Composite Index and Japan's Nikkei index are both down 44%.
Investors who focused on China or Europe did better during the so-called Aughties. Hong Kong's Hang Seng Index is up 58% since the beginning of 2000, while the United Kingdom's FTSE index is up 3.2%.
There were also profits to be had for investors who shunned stocks. Since 2000, the Pimco Total Return Fund, which invests in all manner of bonds, has returned 46%. Meanwhile, the price of crude oil has tripled and gold nearly quadrupled.
The S&P 500 dates back to 1926. Even in the depths of the Great Depression, the index generated positive returns, albeit barely—it rose less than 1% during the 1930s. In the 1990s, it returned 18%, its best 10-year stretch except for the ‘50s, when it generated a 19% return.
But now, barring a for-all-practical purposes impossible rally between now and year's end, the index seems doomed to post negative numbers for the first decade of this century. While investors may like to think of stocks as the best investment “in the long run,” the long run can be very, very long indeed.
[This story first ran in Crain's New York Business, a sister publication to InvestmentNews.]
