Patience & Risk

Apr 13, 2018 | Risk

The latest volatility in the stock market could be driven in part by trade war rhetoric between the US and China.  The final real impact of a trade war on the economy and stock and bond market performance (if any) remains to be seen; but it is a reminder that the market has volatility, has historically had volatility and will most likely continue to have volatility in the future.

Historical Facts on S&P Stock Performance

In the last 90 years ending 2017 (1928-2017) the S&P 500 Stock Index has produced the following statistics:

· 9.65% Compounded Annual Rate of Return.

· 24 years out of 90 where the market had a negative annual return with the worst being -43.84% (1931 Depression era).

· 14 years where the annual performance was positive but below the 9.65%

· 52 years where the annual performance was above the average of 9.65% with the best being 52.56% (1956 post WW2).

We believe the most intriguing of those stats is that in fifty-two of the last ninety years, the S&P 500 Stock Index performed better than the 90-year (1928-2017) average of 9.65%. Or, restated, 52 times in the last 90, the market has performed in excess of 9.65% in the calendar year. It’s difficult for us to look at the market over 90 years for a couple of reasons – 90 years currently exceeds the average human life span and how would investors have reacted during the twenty-four years where the market had negative returns.  How much did those twenty-four down years impact investor time horizons, let alone psychology?

Listed below are the stats on the S&P 500 negative return periods over the last 90 and 50 years on an annual basis, rolling 5-year average, rolling 10-year average, rolling 15-year average and rolling-20-year average.






Time Frame



5 Yr. Avg

10 Yr Avg

15 Yr Avg

20 Yr Avg


90 yrs







50 Yrs







The above stats suggest that the stock market as an asset class has produced nice investment returns over time (last 90 years) but not necessarily over shorter annual periods or even rolling periods. It also suggests that investor Patience (time invested) could work toward an effort to Neutralize Risk (volatility) in the S&P 500 Index given enough time and depending on your investment time horizon because rolling 5, 10, 15 and 20 year investment periods produce fewer down periods than on an annual basis. But even the longer rolling periods of the S&P 500 Index have experienced negative returns caused by short term volatility.

Short term volatility in the S&P 500 Index will continue to plague investors in the future but will your personal time horizon allow you to wait it out as it occurs?

All of that said, we feel it lends further credibility to how we manage money, because for the most part, our client’s aversion to volatility increases as they get older. We invest for the long-term horizon, but we tactically use multiple asset classes to minimize short term volatility so that our clients don’t have to rely on patience (time) to weather the short-term volatility of the S&P 500 Index, at a time when it’s least convenient for them. 



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