Stock Market Performance History: Factors and Events Affecting Returns

The stock market has a long and varied history, with many factors and events affecting returns over the years. The Great Depression of 1929-1941 was a significant event that led to a sharp decline in stock prices, with the S&P 500 index plummeting by over 80%.

The post-war period saw a significant recovery, with the S&P 500 index more than doubling between 1941 and 1965. This was largely driven by the economic boom of the 1950s and 1960s, which saw rapid growth and innovation in industries such as technology and healthcare.

However, the 1970s saw a significant downturn, with high inflation and oil price shocks leading to a decline in stock prices. The S&P 500 index fell by over 45% between 1972 and 1974.

Stock market performance history is a complex topic, but let's break it down into some key points. The stock market has experienced its fair share of crashes, including the Panic of 1907, the Stock Market Crash of 1929, Black Monday in 1987, and the declines related to the 2008 Financial Crisis.

The stock market is known for its volatility, and year-to-year gains can vary widely. In fact, the S&P 500 has had annual returns ranging from 1.4% in 2015 to 31.5% in 2019.

One thing to keep in mind is that the stock market's long-term returns are historically positive. For the 10 years ending in December 2024, the S&P 500 has outpaced the historical average, returning an annual average of 13.3% with dividends.

Here's a breakdown of the S&P 500's annual returns over the past 10 years:

It's worth noting that the stock market has generally performed well under both Democratic and Republican presidents, with an upward trajectory over the long-term. However, it's essential to remember that the stock market is influenced by many factors, and even presidents have limited control over its performance.

The S&P 500 Index Performance is a crucial aspect of understanding stock market performance history. The S&P 500's price returns over different timeframes can vary significantly, with a long-term average annual return of 10%.

The five-year return, which factors in the post-pandemic surge and the 2023 recovery, was 15.36%. The 20-year return, which includes the Great Recession, was 9.00%. The 30-year return, which includes the dot-com crash of the early 2000s, was 9.67%.

The S&P 500's performance during election years is driven by a blend of factors, including whether the incumbent president is running for reelection, the economic and geopolitical climate, and the likelihood of one party controlling Congress after the election.

In terms of party control, mixed control of the House and the Senate can lead to slower change or no change at all, which might be welcome news for the markets due to their fear of uncertainty. The chart shows that the mix by political party in Congress and the White House that yielded the highest average annual returns for the S&P 500 is a Democratic president and divided Congress.

Here's a breakdown of the S&P 500's average annual returns over different timeframes as of the end of 2022:

The stock market has experienced its fair share of downturns throughout history, with October being a particularly infamous month for crashes. The Panic of 1907 was a global financial crisis that began in October of that year, triggered by two speculators attempting to gain control over a copper mining company.

Consumer panic intensified as depositors withdrew funds from banks and trust companies associated with the speculators, leading to a liquidity shortage in the stock market. J.P. Morgan and a group of bankers stepped in with $23 million to keep the NYSE open and operating.

The Stock Market Crash of 1929 was a devastating event that preceded the Great Depression, with stock prices falling by 12.8% on October 28 and another 12% on October 29. This crash was followed by a decade-long economic downturn, making it a significant turning point in history.

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The history of crashes in the stock market is a long and complex one, with several significant events that have shaped the market into what it is today.

One of the earliest and most significant crashes was the Panic of 1907, which led to a global financial crisis.

In October 1907, two speculators attempted to gain control over a copper mining company, but their plan failed, triggering a run on the banks and trust companies associated with them.

Consumer panic intensified, and withdrawals increased, prompting a liquidity shortage in the stock market.

J.P. Morgan and a group of bankers stepped in with $23 million to keep the NYSE open and operating.

The Stock Market Crash of 1929 was another significant event, which preceded the Great Depression.

Stock prices began falling in early October, and investor fear rose, causing the market to go into a tailspin by the end of the month.

The market lost 12.8% on October 28 and another 12% on October 29.

Black Monday in 1987 saw the DJIA fall 22.6%, making it the second-largest single-day crash in stock market history.

Contributing factors included high stock market growth earlier in the year, a growing U.S. trade deficit, the popularity of portfolio insurance, and differences in settlement timing across the stock, options, and futures markets.

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The 2008 Financial Crisis was another significant event, which led to the Great Recession.

The DJIA fell nearly 679 points on October 9, 2008, and then lost 733 points six days later, declining nearly 8%.

Here are the most significant stock market crashes in October:

Wars in the Middle East can affect oil prices, which then impacts companies' energy costs and consumers' budgets, causing investors to sell stocks if they fear a negative impact on companies' bottom lines.

Geopolitical events, such as wars, can cause investors to become cautious and sell stocks, leading to market volatility.

The 1973 oil embargo, a major geopolitical event, led to a significant increase in oil prices, which in turn caused a recession in the US.

Oil price fluctuations can have a ripple effect on the economy, affecting not only energy companies but also consumers and businesses.

A rise in oil prices can lead to higher production costs for companies, which may then pass these costs on to consumers, reducing their disposable income and potentially leading to a decrease in consumer spending.

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Investors can be swayed by irrational emotions, leading to market fluctuations.

Market downturns can be triggered by investor anxiety, even if there's no concrete evidence to support it.

Investor sentiment can drive market trends, with investors selling stocks due to worries about a possible recession.

As investors sell, prices drop, creating a self-reinforcing cycle of panic selling.

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Factors influencing performance are numerous, but some of the most significant ones include economic growth. A strong economy tends to lead to higher stock market returns, with low unemployment contributing to consumers having money to spend.

Low unemployment rates, like those seen in recent years, can lead to increased consumer spending, which in turn boosts corporate profits. GDP growth is another indicator of a healthy economy, signaling that businesses can earn more revenue.

Corporate earnings reports, released every quarter, provide valuable insights into a company's financial performance and future guidance. This data helps investors determine whether the stock price accurately reflects the company's value.

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Stock market returns are influenced by a range of factors, including a company's future value and the valuations investors are willing to pay today.

Some of the underlying factors that affect these valuations include a company's future value.

Investors are often hesitant to invest in companies with uncertain futures, which can lead to lower valuations.

In the long run, the stock market tends to trend upward, but this doesn't happen in a vacuum.

The mix of political parties in Congress and the White House can also impact stock market performance.

Economic growth is a key factor that influences performance. A strong economy tends to lead to higher stock market returns.

Low unemployment is a good indicator of a strong economy, as consumers have more money to spend. This increased spending contributes to higher corporate profits.

GDP growth is another important metric that indicates whether the economy is expanding. A growing GDP is a good sign for businesses that they can earn more revenue.

A strong economy is like having a full wallet, you're more likely to spend and invest, which can lead to higher returns.

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Low interest rates can boost stock prices because they make bonds less appealing due to low interest payments. This increases demand for stocks, driving up their prices.

Companies benefit from low interest rates, as it makes borrowing money cheaper, allowing them to invest in expansion activities without breaking the bank.

Corporate earnings are a key indicator of a company's financial health, and they can have a significant impact on stock prices. This data is reported every quarter and reveals information like total revenue and profit.

Investors use this data to determine whether the stock price accurately reflects the company's value. Publicly traded companies in the US must report their earnings, which provides valuable insights into their financial performance.

Low interest rates can help companies' bottom lines by making it less expensive to borrow money for investing in business expansion activities. This can lead to increased corporate earnings and higher stock prices.

Companies with strong corporate earnings tend to have higher stock market returns, especially in a strong economy with low unemployment. This is because consumers have more money to spend, contributing to increased corporate profits.

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Variability of stock market returns can be unpredictable, with some years showing double-digit positive returns and others experiencing double-digit negatives. The S&P 500 has seen significant fluctuations, including a 43.81% gain in 1928, followed by four years of negative returns during the Great Depression.

The Great Depression showed how quickly market fortunes can change, with a 49.98% gain in 1933, only to fall again slightly in 1934. This same dynamic has played out throughout history, including the Great Recession and even as recently as 2021 to 2023.

The S&P 500's annual returns have varied significantly, with some years showing extreme volatility. The equivalent of the S&P 500 experienced a 46.74% gain in 1935, after a slight decline in 1934.

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