It’s Been A Good Two Years But A Tough Decade

This post was originally published in the Washington Business Journal’s WBJBizBeat Blog. | Washington Business Journal

U.S. stocks have roughly doubled from their nadir in the spring of 2009 and with this rally we can (at last) point to positive returns for the past 10 years — the S&P 500 is up about 35 percent over that period. But do we applaud an annual return a bit over 3 percent? Maybe, since we know we’ve had a period of low inflation.

But hang on — even with low inflation, on a compounded basis prices are up 27 percent over 10 years, so now stocks are up just a bit on a “real,” that is, inflation-adjusted basis. How have Americans done on currency? After all, a strong dollar helps us buy stuff from around the world. Using something called the “trade-weighted index” the dollar is down 30 percent over the same 10 year period.

OK, but maybe our incomes have helped us to keep pace? Not so…personal income (excluding government transfer payments) are up just 12 percent over the same period. Even without $4 gas, we have a stressed consumer.

So after a terrific couple of years for our clients, we’re taking some gains. Washington gave us two more years of 15 percent capital gains; we’re happy to do some re-balancing among our stock/bond/cash allocations and look for some better buys down the road a bit.

Read more: It’s been a good two years but a tough decade