Ashley Vice, CFA, CFP ®
By almost any economic or financial metric, the twenty-tens have been an amazing decade. This has been the first decade in American history without a recession. Our economy grew 40% while the population grew by less than 10%. (Said another way, GDP per capita soared). Unemployment hit generational lows. Earnings of mainstream equities more than doubled, closely in line with the rise in share prices. Meanwhile, the Consumer Price Index grew only 18% (as did the price of a postage stamp). The misery index (inflation + the unemployment rate) hit a 60-year low.
Despite political turmoil, global economic angst, and ten years of negativism from the financial press, investors have had it pretty good. We won’t deny that there were very real, very consequential headwinds in the span of this past decade. There were no less than eight separate instances where the S&P fell by more than 10%, including two where it fell by nearly 20%. And yet here we are.
“He who has patience can have what he will.” – Benjamin Franklin
Let’s take a closer look:
Where We Started:
U.S. GDP (the size of the American economy): $15.36 trillion
U.S. Population: 307 million
S&P 500 price: 1,115
S&P 500 Earnings: $60.60
S&P 500 Dividend: $26.64
Foreclosures hit record highs. Apple unveils the iPad. The Fed launches its second round of quantitative easing (QE2). Unemployment rises to 9.9%. Obamacare is signed into law. 21 states file suit. Greece gets a bailout. A work by Pablo Picasso sells for $106.5 million, a new world record. A “flash crash” causes the Dow to fall 1,000 points in a few minutes. BP’s Deepwater Horizon oil rig explodes. GM comes out of bankruptcy and trades again on the New York Stock Exchange. The Dodd-Frank Wall Street Reform bill is signed into law. The last U.S. combat troops leave Iraq. Germany makes its final reparation payment for World War I. A first-class postage stamp costs $0.46. The S&P 500 returns 15.06%.
The U.S. Constitution is read aloud on the floor of the US House of Representatives for the first time in history. IBM’s supercomputer Watson defeats Ken Jennings on Jeopardy. The Dow hits 12,000. Job numbers start to recover. Congress fights over raising the debt ceiling. Standard & Poor’s downgrades U.S. debt for the first time in history, citing large budget deficits and political risk. Osama bin Laden is killed by U.S. special forces. The Eurozone falls back into recession. Gold peaks at $1,900/ounce. Steve Jobs dies at age 56. The Occupy Wallstreet movement begins. Kim Jong-Un becomes the Supreme Leader of North Korea. The S&P 500 returns 2.11%.
Kodak files for bankruptcy. The Dow hits 13,000. Facebook goes public with a valuation of $104 billion, the largest for a newly public company. Unemployment falls in 41 states. The Encyclopedia Britannica goes out of print. The Fed launches QE3. The U.S. surpasses Russia to become the world’s largest producer of natural gas. Xi Jinping becomes the leader of China’s Communist Party. Barack Obama defeats Mitt Romney to win re-election. The U.S. narrowly avoids going over the “fiscal cliff.” The S&P 500 returns 16.00%.
The Federal government shuts down for the first time since 1996. Ten major banks settle mortgage foreclosure lawsuits for over $20 billion. Computer maker Dell goes private in a $24 billion leveraged buyout led by the company’s founder. The government sues Standard & Poor’s for $5 billion over their assessment of mortgage bonds during the subprime crisis. Stocks hit new all-time highs, with the Dow crossing over 15,000. Apple issues the largest ever non-bank debt offering of $17 billion. The City of Detroit files for bankruptcy on $18.5 billion of debt. A new $100 bill is released. The S&P 500 returns 32.39%.
Colorado becomes the first state to allow the sale of recreational cannabis. The price of a stamp increases to $0.49. The water crisis in Flint, Michigan makes national news. The price of oil drops below $60/barrel. An American dies from contracting Ebola in West Africa. U.S. troops re-enter Iraq to fight ISIS. Alibaba raises $25 billion in the largest IPO in history. The new One World Trade Center opens in New York City. The unemployment rate falls below 6% for the first time since 2008. The 50+ year embargo against Cuba is ended. The S&P 500 returns 13.69%.
The price of oil falls to $34/barrel. The S&P 500 suffers its first “correction” (>10% decline) in four years. RadioShack files for bankruptcy. High-yield bonds crater in response to falling energy prices. A severe drought strikes California. Thoroughbred racehorse American Pharaoh wins the Triple Crown. Worries over slowing growth cause Chinese leaders to devalue their currency, the yuan. David Letterman ends his 22-year tenure as host of The Late Show. Volkswagen is caught in an emissions cheating scandal. The unemployment rate drops to 5%. The Federal Reserve raises interest rates for the first time in nearly a decade. The S&P returns 1.38%.
The stock market has its worst ever two-week start to a year. Oil falls below $30/barrel. Microsoft buys LinkedIn for $26.2 billion. The U.K. votes to leave the European Union. The IPO market is the worst since 2003, with new issues down 40%. It’s discovered that Wells Fargo has been running a scam that created millions of unrequested, fee-generating customer accounts. Donald Trump is elected President. Apple releases the first iPhone without a headphone jack. AI-powered tools like Amazon’s Echo begin to take off. The S&P returns 11.96%
The Dow crosses 20,000 for the first time. The VIX, which measures stock market volatility, hits an all-time low. The Federal Reserve raises interest rates three times. Leonardo da Vinci’s Salvator Mundi sells for $450 million. A special investigation into alleged Russian interference in the 2016 election is launched. Jeff Bezos, founder of Amazon, becomes the world’s richest man. The price of a Bitcoin surpasses $19,000. Toys “R” Us files for bankruptcy. The Senate passes the Tax Cuts and Jobs Act, the largest tax overhaul since the Reagan era. The S&P returns 21.83%.
For the first time in American history, job openings exceed the number of people seeking employment. U.S. household net worth rises above $100 trillion. President Trump announces the first in a series of tariffs on Chinese goods. China retaliates with a 25% tariff on many U.S. goods. The unemployment rate hits 3.9%, the lowest since 2000. Apple becomes the first company to reach a market capitalization of $1 trillion. The price of Bitcoin falls 85%. The Dow suffers its worst week since 2008. The S&P 500 falls 4.38% for the year.
The unemployment rate falls to 3.5%, the lowest level in fifty years. Stock market debuts of venture capital “unicorns” like Uber and Lyft struggle. WeWork shelves its IPO and removes company founder Adam Neumann after intense investor scrutiny. Antitrust cases are brought against big tech companies. The Treasury yield curve inverts. The Federal Reserve cuts interest rates for the first time since the Great Recession. Boeing grounds its entire fleet of 737 MAX aircraft. The price of a postage stamp increases to $0.55. The FAA approves the first ever drone delivery service. The Dow crosses 28,000. Congress moves forward with articles of impeachment against President Trump. The S&P is on track to return more than 25%.
Where We Ended:
U.S. GDP: $21.5 trillion (increase of 40%)
U.S. Population: 330 million (increase of 7.6%)
S&P 500 price as December 6th, 2019: 3,117 (increase of 280%)
S&P 500 Earnings: $135.60 (increase of 225%)
S&P 500 Dividend: $57.22 (increase of 215%)
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