{"id":11718,"date":"2021-06-27T18:34:55","date_gmt":"2021-06-28T00:34:55","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=11718"},"modified":"2021-06-27T18:34:55","modified_gmt":"2021-06-28T00:34:55","slug":"individual-investor-market-return-expectations-from-irrelevant-investor","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=11718","title":{"rendered":"Individual Investor Market Return Expectations from Irrelevant Investor"},"content":{"rendered":"<blockquote class=\"wp-embedded-content\" data-secret=\"vr8t2i9hgX\"><p><a href=\"https:\/\/theirrelevantinvestor.com\/2021\/06\/26\/investors-prepare-to-be-disappointed\/\">Investors, Prepare to be Disappointed<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Investors, Prepare to be Disappointed&#8221; &#8212; The Irrelevant Investor\" src=\"https:\/\/theirrelevantinvestor.com\/2021\/06\/26\/investors-prepare-to-be-disappointed\/embed\/#?secret=vr8t2i9hgX\" data-secret=\"vr8t2i9hgX\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<p>Great post by Michael Batnick and Josh Brown&#8217;s group over at Ritholtz that hit the wires Sunday, with the topic being individual investors elevated expectations about future returns.<\/p>\n<p>There is a few graphs on the 11 minute podcast but the upshot is that &#8211; according to the survey &#8211; investors are expecting 17.5% &#8220;real&#8221; returns in the US stock market going forward.<\/p>\n<p>For some perspective, here is a return chart of the SP 500 (including the dividend reinvested), from 1\/1\/2000:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-11720\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000-300x195.png\" alt=\"\" width=\"300\" height=\"195\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000-300x195.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000-1024x667.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000-150x98.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000-768x500.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/06\/SPYavgannualret112000.png 1144w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>The &#8220;average, annual&#8221; return for the SP 500 over the last 20.5 years is precisely 7.14% per year.<\/p>\n<p>That&#8217;s actually right in line with the long-term, post WW II average for broader market equity returns the last 70 years.<\/p>\n<p>If we look at shorter time frames for the SP 500:<\/p>\n<ul>\n<li>1\/1\/2000 &#8211; 6\/25.21: +7.14%<\/li>\n<li>1\/1\/2010 &#8211; 6\/25\/21: +14.72%<\/li>\n<li>1\/1\/2015 &#8211; 6\/25\/21: +14.17%<\/li>\n<\/ul>\n<p>Coming into 2021, in an end-of-year or beginning of year blogpost, I was worried about the cumulative returns on the Nasdaq on the SP 500 since 1\/1\/2019. Remember Jay Powell softened his views on monetary policy in Christmas week, December, 2018, and then the SP 500 took off. Here are the two year &#8220;cumulative&#8221; returns for the SP 500 and the Nasdaq:<\/p>\n<p>1\/1\/2019 &#8211; 12\/31\/20:<\/p>\n<ul>\n<li>SP 500: +55.68%<\/li>\n<li>Nasdaq:\u00a0 +103.4%<\/li>\n<\/ul>\n<p>I&#8217;m still worried about 2021 given that the month of January &#8217;21 had a negative return. Remember the old market maxim about January&#8217;s: &#8220;as January goes, so goes the market.&#8221;<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>Long-term SP 500 returns are just about average, while it&#8217;s safe to say that over the near-term, retail investors might have elevated expectations. The survey quoted by Josh and the team distinguishes between individual and institutional investors so the problem lies with retail investors.<\/p>\n<p>While doing performance meetings with clients, on occasion, I will ask them what they thought the Sp 500 or the Nasdaq returned in a given period, just to see how closely they pay attention, and the answers can be wildly disparate from actual returns. It really depends on the headlines over the last 30 &#8211; 60 days.<\/p>\n<p>My guess is most clients don&#8217;t know that the &#8220;average, annual&#8221; return for the SP 500 post WW II is 7%.<\/p>\n<p>With 14% &#8211; 15% average, annual returns for the shorter timeframe, you could make the case that returns are elevated, but remember the QQQ averaged about 37% &#8211; 38% per year, while the SP 500 averaged 25% per year from January, 1995 to December, 1999.<\/p>\n<p>Anyway, more good work from Michael Batnick, author of Irrelevant Investor, which prompted a longer blog post around that survey.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investors, Prepare to be Disappointed Great post by Michael Batnick and Josh Brown&#8217;s group over at Ritholtz that hit the&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[248,255,93,260],"tags":[271],"class_list":["post-11718","post","type-post","status-publish","format-standard","hentry","category-annual-return","category-average-annual-return","category-sp-500-forecasts","category-sp-500-long-term-returns","tag-expected-returns"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11718","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11718"}],"version-history":[{"count":6,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11718\/revisions"}],"predecessor-version":[{"id":11725,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11718\/revisions\/11725"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}