With stock prices at record highs, I thought it might be interesting to go back and see what the S&P 500 index has done during my conscious lifetime.
In May of 1973, I got my first job in the private sector after I received an early out from the Air Force following the end of the Vietnam War. I went to work for the largest bank in Texas, in Dallas, and began to think about all things financial like how could I afford a house? How could I save for retirement? How would we afford kids? How could I afford their college education?
That is when I got serious about investing and, in particular, investing in the stock market. The S&P index, which takes into account the largest 500 companies by market cap, was at 107.20 in May of 1973. As I write, it stands at 2,477.
I had always read and been advised that the stock market was the best place to be, particularly for younger people since that is where historically the greatest returns had been earned. I went back and looked at how long it had taken to double the index in my lifetime and found the following:
S & P 500 Index
May 1973: 107.20
February 1986: 219.40
February 1993: 441.70
June 1997: 876.29
November 2013: 1,784.54
July 2017: 2,477
Some observations on those numbers are in order. While I have been invested in the market, it has more than quadrupled. It took 13 years for the index to double from May of 1973 to Feb. of 1986. It doubled again in just seven years from 1986 to 1993, and then doubled again by June of 1997. Then, it took 16 years to double from 1997 to 2013. It also tells me something else: I have been fortunate to live in pretty prosperous times.
Clearly, the market has performed really well in my lifetime. I have benefitted greatly from the runup in stock values and having invested early in my career was one of the best things I did. It is also proof that saving early in life is fortuitous.
Having said the foregoing, it has been a volatile road along the way. Stock prices have not just increased year after year. If you simply look at the S&P 500 index in this century, you can see some pretty significant swings. The human psyche is interesting, we sometimes forget what has happened, but let me take a moment to reflect on the last 17 years for this index. Let’s look at some relatively recent dates, what the index was and what happened:
March 24, 2000: The S&P 500 closed at 1,553 at the height of the dot-com bubble.
Oct. 9, 2007: The S&P closed at a record high of 1,565, 12 points higher than seven years prior just before the 2008 financial crisis.
March 9, 2009: The S&P closed at 677, the low during the financial crisis.
March 28, 2013: The S&P closed at 1,569, surpassing the record attained in 2007.
Aug. 28, 2014: The S&P closed above 2,000 for the first time.
July 25, 2017: The S&P closed at 2,477.
As can be seen from the foregoing, in just the last 17 years, the S&P has fluctuated wildly. The dot-com bubble, the financial crisis of 2008 and the long bull market since March of 2009 have all affected the index. From 2000 to 2013, the market was essentially at the same level with huge volatility in between.
While valuations are quite high, I still believe the best place to be is the stock market. I have no official accreditation or certification to say this to you. It is a personal opinion. You can see from the data above that long-term investors have been rewarded. It is adamant that one start investing early in life and stick with it even though the road to your reward may be bumpy and downright scary at times. The stock market will once again experience corrections, experience a bear market but will invevitably rebound and reach new highs.
Jeff MacLellan is retired from Landmark Bank. He spent 37 years in banking, and has been tracking local economic indicators since he came to Columbia in 1987.
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