Lost Decade: The S&P 500 Stock Index Has Declined 30% Since 2000

Sheesh. And we wonder why both the conservative Tea Partiers and the liberal Occupy Wall Streeters are angry?

What this means is that the economy never really recovered from the collapse of the dotcom bubble. The loosening of financial regulation, in the wake of the 2001 recession simply reinforced a nascent trend towards loss of US competitiveness that had been building since the economic victims of WWII got back on their feet.

It further suggests that 'financialization' of the economy in Europe and the US enriched a few, but left the many in the lurch. The Double Whammy of the real estate bust and the financial Lost Decade has signficantly detracted from the American consumer's ability to support the economy. It means less investment in jobs, less growth, less income to spend. When said consumer typically generates as much as 70% of said economy, that is a problem.

The ideological opposition to John Maynard Keynes and his theory of 'pump priming' to stimulate demand in times of hardship remains implacable. But until a workable alternative solution emerges, one senses that Europe and the US are caught in a giant economic experiment which may not work out. JL

Doug Short reports in Business Insider:

Here is a new update of a chart that illustrates the total return performance of the S&P 500 since the Tech Bubble closing high on March 24, 2000.

The chart shows the value of $1000 invested in the index, including dividends, but excluding any taxes or fees, as of October 7th
I calculated on the returns based on the daily price and daily dividends interpolated from the quarterly dividends as reported by Standard & Poor's. Thus the $934 nominal and $702 real values are the hypothetical returns excluding any taxes or fees.

For the sake of comparison and to validate the calculation method, we can compare the nominal return in the chart above to Vanguard's 500 Index Investor Fund (VFINX), which has had a nominal return of $922.

We're now over eleven years beyond the S&P 500 2000 high. This little charting exercise gives credence to the frequent reference to a "lost decade" for investors. In nominal terms, the index is about 6.6 percent below where it was at the 2000 peak, but in real terms, it's a disappointing 29.8 percent off the original investment. The chart also offers support for the wisdom of diversification across asset classes ... and perhaps the value of active management during secular bear markets.

For anyone interested in total returns on a lump sum with an additional fixed-sum monthly investment, check out the nifty calculator at Political Calculations.

Note: The dividends for the most recent months are from Standard & Poor's. For real returns I use a linear extrapolation for the most recent month(s).

The Political Calculations calculator does not use extrapolations. Thus the latest end date is a month or two behind the current date.