At Winthrop, we help our clients live life in the moment while boldly exploring and imagining possibilities for their future. Our approach enables us to explore every aspect of your life so that we can design a big-picture plan and investment solutions that balance practicality with opportunity.
Whoever you are, and wherever you are on your journey, our multi-generational team has all the tools and experience to help you pursue your financial goals—and live your life to the fullest.
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We work closely and collaboratively with our endowment and non-profit clients to provide investment programs and hands-on portfolio management services pursuing global opportunities while seeking to ensure alignment with key business objectives.
We’re committed to seeking out and sharing the trends influencing markets and the outlooks that might inform our investment approach. In an industry like ours, being open to multiple viewpoints and fresh perspectives is a critical part of how we add value, and help our clients imagine all the possibilities.
In the world of finance, things change fast and there’s always more to learn. We’ve created a series of tools that will help you stay educated and keep you informed about the things that matter most.
Client Questions | May 30, 2019
To answer our latest client question of the month we examined rolling 10-year periods for the S&P 500 from January 1928 through May 2019. Rolling time period analysis allows for a larger data set than calendar year periods. Since the start of 1928, there have been 978 total rolling 10-year periods (January 1928 to December 1937, February 1928 to January 1938, March 1928 to February 1938, etc.).
Of the 978 total periods, 910 (93.0%) have generated positive returns while 68 (7.0%) produced negative results. The negative 10-year return periods all occurred during severe economic recessions and market weakness, including, the Great Depression (1930s), Tech Bubble (early 2000s), and Global Financial Crisis (2008). We will also point out that the first 43 rolling 10-year periods of our data set (starting in January 1928) had negative returns.
The average rolling 10-year annualized return over the stated time was +10.29%, with 93.0% of periods generating positive returns. Note that the latest 10-year period (June 2009 to May 2019) has produced a total annualized return of +13.93%, which is greater than the historical average. However, keep in mind that the latest period starts right after the end of the Global Financial Crisis, and thus part of the strong return is a rebound from depressed levels. Investors should acknowledge that recent rolling 10-year period returns have been stronger than the historical average, and should be prepared for the potential of more moderate returns going forward.
Our main takeaway from this analysis is that equities have generally produced positive results over long-time periods. This reinforces our philosophy that the best approach is to maintain a long-term viewpoint as equity markets can be extremely volatile over short time periods. Historically, equity markets have been an excellent source of wealth creation, however, it is important to note that market returns are not linear. In other words, equities do not rise by an equal amount every week, month, year, or even decade. Some periods are significantly better than others. The longer the investment time horizon the greater the odds of positive returns.
Investors with long time horizons can likely afford to ride through negative periods unless they shoot themselves in the foot by selling their equities out of nervousness or frustration and locking in their losses. Periods of market weakness also create opportunity for long-term investors as they can reallocate to more attractive securities, execute tax loss harvesting strategies, and/or add new money to purchase at lower prices. We understand that no one likes market declines, but we can use these periods to our client’s advantage by making meaningful adjustments and improvements to their portfolios.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All indexes mentioned are unmanaged indexes which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risk including loss of principal. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment Advice offered through Winthrop Wealth Management, a Registered Investment Advisor and separate entity from LPL Financial.