Stock Market History Illuminated, 2023 Style

I’ve been keeping a graphic of the long-term performance of the US stock market for many years now. In late 2017, I started blogging (and set up a twitter account), and at the end of each year since I’ve been sharing this information in the histogram below. I think it does a reasonable job of revealing how long-term returns are manufactured and the tilts over time. I’ve also color-chunked the data by decade to highlight decades of historical weakness as well as periods of strength.

I’ve also added additional tables and charts further below, which I think are interesting (comparisons to Europe, or between value and growth), and in some cases, stunning.  You can scroll down to follow along.  

But first, the histogram:

 

Taking a step back at global markets, but dialling in to the recent 12 months, in terms of major global markets, Mexico outperformed everyone, with the US, Germany, and France all generating similar strong performance. Meanwhile, things weren’t great in China.

But if we go back to the beginning of the last decade, the US has crushed it. In size.

And if you break down the US performance last year, value stocks were trounced by growth stocks.

In Europe, however, there was not the same disparity.

And if we again go back to the last decade, and extend hereto the end of 2023, growth stocks have severely outperformed value stocks in each geographic region; and both growth and value in the US outperformed growth and value in Europe dramatically.

As we have mentioned before, what interests us is that – until the last decade - European and US stock markets behaved very similarly over many years. Given that many constituents in both markets are global businesses selling many similar products and services multi-nationally to similar regions, countries and customers, this made sense.

From the end of 1979 through the end of 2009, the total returns from Europe and the US were almost precisely the same (both of them 26-baggers!), each generating 11.5% total annual returns over 30 years.

And as we have also written about, there has been a severe decoupling of returns since then.  We won’t debate the reasons here why this may or may not have made perfect sense (our answer, it’s a mix of both), but it is illuminating in any event.

None of this necessarily says anything about tomorrow,it’s just interesting.  Food for thought, I guess.

‍