Beyond 2024

As the New Year gets underway, many ponder what returns we might expect from the share market. Will this year be better than last? Is a recession likely to emerge? What of inflation and interest rates?

We could dive into a discussion about economics, about geo-political risk, or the environment. We could discuss AI, debt levels, Central Bank policy or the US election scheduled for later this year. But you know what, that stuff’s always constant and today’s news is not so very different to yesterdays. So, let’s talk about something far more interesting and perhaps a more helpful context for what lies beyond.

Returns are rarely average...

Over the break, I happened upon a podcast by Mark Lister, from Craigs Investment Partners. He was talking about the market’s average return being anything but “average”. It was a fascinating chat…

Mark described how he’d researched back to the year 1900. It was a random date, one that captured a lot of data, but from which he could draw some reasonable conclusions. This precise data set revealed that from the beginning of 1900 to the end of 2023 (124 years), the US share market had appreciated by 9.9%pa. In anyone’s book, that’s a pretty good long term average return.

Now, most of us will immediately frame this “average” in our mind as being a consistent occurrence. But, as we also know, share markets are volatile. So, we might intuitively assume this “return” occurs in a range, say of between 8% to 12%pa? Indeed, I’m guilty of describing this very range as an indicator of what investors should expect in the long-term. But, of these 124 years, just four can be observed as having delivered an actual result in this range (these were: 1912, 1993, 2004 and 2016)!

Digging even deeper: there were 32 years when the US market was down (so, about 25% of the time). In those yearly observations, 7 years found the market down 10% or more, but there were another 8 years when it was down 20% or more. The worst years were 1931 (down 39.3%) and 2008 (down 37%).

Of the 124 years, 92 were positive (so about 75% of the time). 46 of these delivered a return of 20% or more, while another 16 made 30% or more and there were 4 years that produced a whopping 40%pa+.


Risk exists everywhere, every day. We can mitigate risk with various strategies and we can position to smooth yearly results. If nothing else, the world is a hotchpotch of uncertainty and risk can be hard to measure. Return however is easy to see: since 1900, the US share market return has averaged 9.9%pa. But, over this 124-year period, it is rare to see the actual annual return being anything near an actual 10%pa. Massive “variances” occur most years (irrespective of risks; be they wars, pandemics, inflation and so on).

No one can tell us when the good years, or the bad years, will be but, we can see and therefore say that over the very long-term, the share market delivers great returns 100% of the time. Of course, none of us has 124 years ahead but, there are some very reassuring lessons from history for us to take away.

With degrees of certainty we can say, three quarters of the time the market is up (that’s good odds), and it is six times more likely to have a 20% plus return, than a 20% minus (those aren’t bad odds either).

If we realise a loss because we get spooked, or we prioritise today’s spending over tomorrow’s investment return, we’ll possibly sell at the wrong time and it’s then much harder to recover that ground. So, it’s important to hold to the plan. There will be plenty of occasions when the time is right to sell.

The views and opinions expressed in this article are intended to be of a general nature and do not constitute personalised advice for an individual client.

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