Over the last few decades, there have been few truly “bad” times to put money into the market.
Despite some recent volatility and significant pullbacks in some mega cap tech stocks, the S&P 500 (SPX) is trading only about 3% off the all-time high it reached June after gaining roughly 20% off the March low. Given the speed of the market’s rebound from its Q1 swoon many people may have missed the opportunity to “buy the dip” and with the market once again trading near all-time highs, may be hesitant about putting money into the market, especially with the renewed tension in the Middle East, which was of the major contributing factors to the Q1 sell-off.
We can certainly understand this sentiment and we’re not advocating for this being an ideal entry point - from both a fundamental and technical perspective, there are reasons to be concerned about how much higher the market can go in the short-term. But, over the last few decades, there have been few truly “bad” times to put money into the market.
As technicians, we don’t promote a “buy-and-hold the S&P 500” strategy. We believe there is benefit to be had by rotating between areas of relative strength and adjusting your level of exposure based on the market environment. But, if you have clients who would prefer to sit on their hands unless everything seems perfect, it can be helpful to show them that historically, even less-than-ideal entry points have better than sitting on the sidelines.
The image above shows the annualized returns for the S&P 500 Total Return Index (TR.SPXX) for every year from 1990 through 2025. So, for 1990 (12/31/1989 start date) we have 36 years of returns, while 1991 has 35 years of returns, and so on. The annualized returns for 1990 run across the top row, the returns for 1991 run across the second row, etc. As you can see, the returns for most start dates are positive within a couple of years.
There are a few periods where the returns are negative for several years – mostly for start dates around 2000 – 2002 and around 2008, showing that these outsized and multi-year drawdowns can have an impact even over a multi-year horizon. At year 25, the annualized returns for the 1998 - 2000 portfolios sit at around 7.7% lagging the 1997 portfolio by about 2%, a significant difference when you consider it amounts to more than 60% on a cumulative basis. However, while less ideal that 7.7% annualized return is significantly better than what would have been earned sitting in cash.
As you can see, there are relatively few “bad” starting points. The 2007 portfolio, started just before the Great Financial Crisis has an annualized return of almost 11% 19 years later and the 2022 portfolio, which started just before a major drawdown, now shows an annualized return of more than 11%
It is also worth noting that these are simple buy-and-hold returns, investors who took a tactical approach and avoided tech stocks during the dot com crash likely show significantly better long-term returns than the late 90s sample portfolios shown here.
