10 Stats About The Last 10 Years

Tyler Durden's picture

By Nick Colas of Convergex

10 Stats About The Last 10 Years

The headline this week that Goldman Sachs’ stock has gone nowhere for a decade got us thinking about general market performance over the last 10 years. The key contours are straightforward: subpar price returns (a 4.9% compounded annual growth rate for the S&P 500) with increased volatility (a VIX that is 25% more volatile than average).  From there, things get funky.  Consumer Discretionary – not Tech or Health Care – is the top performing sector, up 137% over the decade, in no small part due to Amazon (up 1,600% over the period and in the S&P 500 since 2005). Only one sector is down over this timeframe: Financials, 28% lower (making Goldman an outperformer in its sector, funny enough).  And gold (up 87%) has trounced stocks (S&P 500 up 62%).  There’s more, and in this note we also look for where some of these anomalies may revert to a longer run mean.

Think back over the last 10 years - how different was your life in April 2006?  While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:

  • No iPhone. Steve Jobs unveiled the first iPhone in January 2007, and it didn’t ship until June of that year.
  • No Facebook (unless you were in college at the time). Facebook only opened to the general population in September 2006.
  • No Twitter. The full version of the product launched in July 2006.
  • No Instagram. The picture sharing site only launched in 2010.
  • No Kim Kardashian. “Keeping up With The Kardashians” debuted in October 2007.
  • No Uber. The company received its seed funding in 2009.
  • No iPad. Apple started taking pre-orders on the first-gen product in March 2010.

It feels like April 2006 demarcates the last days of some Dark Age, or at least a simpler time without the manifold distractions of today.  And while you might opt for a world without the Kardashians, imagine it without your smartphone, Facebook/social media, and an iPad to entertain the kids (or yourself). It’s ok – don’t panic. You have them now.

The journey from April 2006 to April 2016 in financial markets has, of course, been a wild ride.  But just as it is hard to remember what daily life was like a decade ago, it is also easy to forget some of the important waypoints that capital markets took from there to here.  And sometimes looking in the rear view mirror is helpful to considering the road ahead.

Investing has a name for that exercise: “Reversion to the mean”.  Anomalies can exist for long periods of time, but eventually asset classes revert to some natural risk adjusted rate of return. In economics, policymakers look at long-cycle data to grade their efforts at managing the macro economy. The bottom line: an occasional glance backwards at the data is a useful exercise even if all you really care about is predicting tomorrow.

Here are 10 data points about the last 10 years we hope you will find useful:

#1 – U.S. Consumer inflation (as measured by the CPI) over the last 10 years: 18%.  That translates into a compounded annual growth rate of 1.67%, well below the Federal Reserve’s goal of 2%.  The most recent core inflation data from the CPI shows a little higher (2.2%), but the core PCE data is more in line with the long run headline average (1.7%).

Key takeaway: a decade – even one with a financial crisis in the middle of it – is a long enough period to assess structural inflation.  A 1.7% average rate may just be a new normal, at least until the next recession when it will presumably decline. 

 

#2 – Price appreciation for the S&P 500 over the last decade: 62%.  The compounded growth rate here is 4.9%.  The best performing major average over the last 10 years is the NASDAQ Composite, up 110% or a 7.7% compounded annual growth rate.

Key takeaway: no matter how you slice it, equity market returns are not double digits anymore even when you add 2% or so for dividend payments.  Now, pick the right entry point (mid crisis should do it) and they are obviously much higher.  But over a decade, 5-8% seems to be the market’s speed limit.  Not bad, but not the +10% numbers of the 1980s and 1990s.  

 

#3 – S&P operating earnings 10 years ago: $73/share on its way to $82 in 2006.  Inflation adjusted, those 2006 normalized earnings of $77.50 would be $91.45 today.  Actual trailing four quarter earnings for the S&P 500 right now are $100, or 29% higher than the operating earnings back in 2006/7.

Key takeaway: earnings are 29% higher than 2006, but the S&P 500 is 62% above the levels of a decade ago.  Earnings multiples have expanded because interest rates have declined; don’t forget that the U.S. 10 year Treasury had a yield of 5.0% in April 2006.  Now, it is 1.7%.

 

#4 – The best performing sector over the last 10 years: Consumer Discretionary, up 136%.  In December of 2005, the S&P Committee in charge of choosing companies to add to the large cap 500 index decided to include Amazon. Good choice, because over the last decade the stock has returned +1,600%. In their eyes, however, it was a Consumer Discretionary company, not a Tech concern. That decision, plus good returns from other large brand-name consumer companies, makes this industry the best performing major sector in the S&P 500.

Key takeaway: this sector seems ripe for some reversion-to-the-mean underperformance, unless the S&P Committee finds some other hyper-growth names to add to the collection.  Wonder where they would put Uber?

 

#5 – The price of a barrel of crude in April 2006: $75.  If crude oil prices had just kept up with inflation over the last decade, a barrel would cost $88.59. Instead it is $43/barrel.

Key takeaway:  What if I told you oil would trade for $30/barrel in 2026?  Or $130/barrel?  How would it change your long term outlook, and which do you believe is more likely?  My own thought is that oil will be higher in a decade and large cap energy stocks are a good long term hold. 

 

#6 – The best performing market cap range in U.S. equities over the last decade: mid-caps, up 87%.  Over a long period, you would expect to see risk and return scale as the textbooks tell us they should: more risk equates to higher return. Yet small caps are only up 52% (Russell 2000) to 78% (S&P Small Caps) and the S&P Mid Cap Index is 87% higher.

Key takeaway: another candidate for reversion to the mean underperformance over the next decade. 

 

#7 – Average daily VIX levels over the last 10 years: 21, barely higher than the long run average of 20, but with much higher volatility. The standard deviation of moves in the CBOE VIX Index since 1990 is 8; over the last decade it has been 10.  Simply put, volatility was more volatile in the last 10 years.

Key takeaway: One trend that should last for the next decade.  The average for the VIX may not move very much, but periods of market churn will elicit greater investor concern.  This should be especially true in the next recession, whenever that comes, if only because markets will worry about what policymakers will do to combat that next economic slowdown. 

 

#8 – Total venture capital raise in the last decade: $426 billion. It has been a golden age for VC investors and the companies they support.  Many of the new products we listed at the top of this note would have never come to market without this source of capital.

Key takeaway: VC money flows do seem to be waning.  Deal count receded in 2015, from 9,381 in 2014 to 8,097 in 2015.  Capital invested, however, was $77 billion – the highest in a decade and almost 3x the $26 billion invested in 2006.  See here: https://pitchbook.com/news/reports/2015-annual-us-venture-industry-report

 

#9 – Total money flows out of U.S. equity mutual funds: $209 billion, according to the Investment Company Institute. 

Key Takeaway: We don’t have the 10 year numbers handy, but inflows into U.S. stock ETFs over the last 5 years total $368 billion.

 

#10 -   Gold has outperformed equities by a wide margin, +87% versus +59% for the S&P 500.

Key takeaway: one of the more surprising results from our 10 year lookback.  The contrarian in me wants to believe the performance here will converge, and equities will outpace gold for the next decade.  But consider this: which sounds more likely – gold at $1,860/oz (pretty much its 2011 highs) or S&P 500 at 3126?  They are both 50% higher than today’s close.

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Government needs you to pay taxes's picture

In looking at probabilities over the next 10 years, I'd get physical.  PM, commodities, used productive machinery, farmland. Fuck paper assets.  Anything paper is likely to get hammered over the next 10 years.  That's equities, debt, fiat currency.  I expect .gov will look to tax paper more heavily over the next 10 years as well. . .

Muddy1's picture

NO Kim Kardashian or her sisters or Caitlyn, SWEET!!!!!

The Alarmist's picture

No Obama for that matter, but then again, we did have the Shrub.

robertsgt40's picture

No "I Am Caitlyn"?  How did we manage to get this far? 

Pool Shark's picture

 

 

No iPhone

No Facebook

No Twitter

No Instagram

No Kim Kardashian

No Uber

No iPad

 

Yep. Fortunately, my life still hasn't changed...

SilverDOG's picture

WHAT !?

No icarpal tunnel syndrome.
No iphone brain tumor.
No collapsed neck vertebrae.
No self inflicted A.D.D.
No iamnotme I am somebody else..... somewhere.
No iInjury while operating iphonestupidity.
No EBT card.
No complete body, home, records, social, personal, genetic, eye, ear, down the throat govt. scam scan?

What complete and total LOOOZERS..... we must be.
I refuse to follow 90+ of 100 monkeys down that road.

They will drop like flies.
plz.

The Saint's picture
The Saint (not verified) SilverDOG May 1, 2016 12:11 PM

Each generation always thinks the next generation is going to scew everything up.  It's human nature.

This time they are right.

John Kich's picture

Trump Got It Right Again. This Is the Undeniable Proof...

However the mainstream media isn't saying a word about it!

What are they really trying to cover up?

www.legitorscamreview.com/the-final-bubble

skinwalker's picture

I've always been greatly angered by the rock/paper/scissors game. 

 

If rock (A) beats scissors (B) and scissors beats paper (C), then how the fuck does paper beat rock? If A>B>C, then C>A simply doesn't work! 

truthalwayswinsout's picture

Rock, paper, sissors is just a manifestation of the oppression that white males have inflicted upon the black community.

Theonewhoknows's picture

Just like I told you before - commodities = THE ASSET of the next decade: http://independenttrader.org/commodities-assets-for-the-next-decade.html as they are the cheapest since 1974 http://independenttrader.org/commodities-cheapest-since-1974.html

pilager's picture

Pussy should get cheaper. Less work, less independence, more violence .... Cost of per puss should ration down.

cowdiddly's picture

cost per puss, lol now thats a ratio I could get into.

Consuelo's picture

Don't worry, that's cumin'...

matinee55's picture

You forgot, NO GAY, DEGENERATE, TRANNY LOVE -

Strode2's picture
Strode2 (not verified) May 1, 2016 9:44 AM

Unfortunately, the media, government and finance is still infested with Jews!

didthatreallyhappen's picture

and you are still infested with lice!  lolololol

OverTheHedge's picture

A simple shampoo treatment will get those lice without any fuss.

As for the other........

Krungle's picture

And the Goyim that allowed their court Jews into those positions are still infesting the world too....

 

Ausonius's picture

Anyone who believes government statistics that inflation averages under 2% a year is not paying attention to the evidence in supermarkets, housing, rents, healthcare, etc. etc. etc.

Lorca's Novena's picture

10 years ago the race relations in the US were actually fine for the most part, people were starting to see that war in the ME was unnecessary, and house flipping actually made money.

Now, we have massive racial violence, half the country on EBT, NO middle class, and civil unrest and a world war in the near future.

Fuck you Obama et;al

SilverDOG's picture

10 years ago there was a momentary lapse of reason by the majority.
Encrusted belief surpassed reality.
Now is the same as then, and as it ever was.
POV changes when told.
Amazing, given the rhyme of history in which we crouch.
Then again, most are brazenly & self righteously stupid. -not pointing @.
Crouching is goooood, - JIm Carrey tone

Lorca's Novena's picture

Reminiscing about 1996 while going to "college" in san diego.... Windoze 95, re-ermegence of punk, seeing the ramones, and nobody had a frikkin cell phone. "Hey, I'll meet you at __________ at 8:00" !!!  Life was grand.

rawsienna's picture

oil -- not sure about 10 years but in 20 years -- assuming we are still here -- nobody will care.

29.5 hours's picture

 

 

"Think back over the last 10 years - how different was your life in April 2006?"

I was still working for a living then. Ahh, those were the days...

In other aspects, I am still avoiding intrusive electronic devices and the various ubiquitous Kardashian butts.

 

 

brown_hornet's picture

I still don't have any icrap

not on Facebook

Not on instagram

Not on Twitter

Never watch KK

Never ridden Uber

skinwalker's picture

Then you are obviously a subversive and must report to your nearest reeducation camp! 

ClydeCrashcup's picture

What's icrap?

What's Facebook?

What's instagram?

What's Twitter?

What's Uber?

 

Fuck, I don't even own a cell phone.  This desktop computer is as far as I'm willing to go into technogeekdom.  I guess I'm just not that important, or self-absorbed, to want to constantly carry around an electronic leash on me.

rejected's picture

"It feels like April 2006 demarcates the last days of some Dark Age..."

I would not have heard a person in a crying tone tell me "I can't live without my facebook".

I would not have to listen to some manager at work (still employed!!!!) tell me how much more efficient I am now that I have both an Iphone and Ipad. Both which I have only plugged in their chargers,,, only bring them out for 'mandatory' updates.

I would not have to watch the FSA crying for MOAR! of my earnings walking around with the latest Ithingy's.

Not the last days of some dark age,,,

it's the beginning of a new dark age full of digital zombies.

CorneliuCodreanu's picture

Of the list I only have an Ipad and am no worse for the wear. 2006 was a vintage year in comparison. 

lordbyroniv's picture

My comic collection has tripled in value !!

 

Thank you Obama !!!!!!!!!

 

Thank you 'The Bernanke' and Old Yeller !!!

 

 

True Blue's picture

Is that the collection of 535+ 'representatives' who have tripled their net worth while in 'public office'?

cowdiddly's picture

Yes he states  in number 1. that compounded annual growth is up 18% in the last 10 years but in  number 2. the Nasdaq is up 110% in the last ten.

So, let me ask you a simple question Nicky baby. Where did all this extra growth come from? yep crickets.

There are two explainations for this, either the difference lies on the wrong side of the balance sheet in the Liabilities section, meaning DEBT. Or, stocks are historically astronomically priced. Take your pick buddy, because the end result will be the same..

Peconic Bay's picture

I think Nick Colas is using non-GAAP S&P 500 earnings. The current TTM GAAP number is $86.00 and shrinking.

Rock On Roger's picture

10 years ago I had no zerohedge.

OverTheHedge's picture

No zerohedge

No GFC

No Greek crisis

No eurozone crisis

No Syrian war

No Ukranian war

No disappearing Malaysian Airlines aircraft

What the fuck did I worry about all day?

Ahh, I remember; I used to read books in those days. Spare time was for enjoying, not planning for the zombie apocalypse.

How we have come on, in the last 10 years.

 

NihilistZero's picture

So I guess I'll be the one to point out that the author is comparing the peak of the last bubble to what is likely the current peak? I have no idea how long or deep it will be, but a deflationary cycle is about to begin.

The Social Justice Warriors victory I getting a $15 a hour minimum in CA is a canary... TPTB could care less about unskilled workers living standards. However they are quite concerned with putting a floor under RE assets prices. So congratulations proles, we would have been forced to drop your rents even lower, but we see you got a 33.3% raise. The increased inflationary squeeze your wage places on your used-to-be-middle-class brother will surely be taken in stride.

fishwharf's picture

I believe the look back ten years from now will be much more dramatic than the look back today, especially so if the neocon warmongers have their way with us.

Consuelo's picture

We might be 'looking back' from an ethereal plane...  

 

 

Witch-king of Angmar's picture

The VIX index comes up a lot on ZH...just like in this item. When talking about central tendency, most commentators refer to the average VIX level. Since its inception, the average VIX (based on the closing daily index) is about 19.4. However, the distribution of the daily, closing VIX values is very skewed. There are relatively few, but very high, VIX closing day values. And extreme high values in any distribution will pull up the average by a lot.

Specifically, the MEDIAN daily closing VIX index value is 16.5. So it's up for debate what the best measure of the central tendency of the VIX is. In this case, I prefer the median, or middle, value, because half the time the VIX is above 16.5 and half the time it's below 16.5. YMMV.

The Real Tony's picture

The risk premium has always been too high for oil and supply disruptions and war the last ten years. The long term trend line is at 30 dollars a barrel. Given the state of the world economies moving forward in time I'd bet in 10 years oil will be back at 30 dollars a barrel.

I Write Code's picture

Bitcoin.

The Arab Spring, Libya/Syra/ISIS.

I think I was still sporting my first flip-phone.

I was still using a key to start the car.

In 2006 I had not yet even bought a flat screen tv.

Within the US, it's actually been a relatively quiet.  All the action was due to the 2008 crash and attempts at recovery and support since.  IOW it's been a ZH decade.

Consuelo's picture

 

 

 

"The contrarian in me wants to believe the performance here will converge, and equities will outpace gold for the next decade."

 

 

I'd hardly call that a 'contrarian' take, Nick.   Jeezus dude, C'mon.   Crawl out of your U.S.-centric 'bubble' and smell the geopolitical smoldering pile of U.S. $paper...

True Blue's picture

C'mon. He uses the BS CPI to calculate inflation and insists it is only 1.8%; clearly he is either a shill or a muppet, hardly either contrarian or objective.

Conax's picture

For me, nothing above has changed.

I've never even had a cell phone. I'm like a dinosaur from the '60s museum. Zippo lighter, buck ranger, keys, comb and wallet.

I can't text.

And nobody likes me..

A street punk tried to rob me but he didn't even want the zippo, went away all mad.

:/

Lolz!

ft65's picture

Good article, would have been even better to add another 10 items such as
1) Amount of QE pumped into the economy
2) The increase in size of big corporations
3) The number of billionaires
4) The decrease of mom and pop shops
5) Number of home foreclosures.
6) Number of people renting and cost of rent
7) The number of people with company pensions / health plans
8) Value of the biggest banks
9) Number employed in the public sector
10 Amount spent on the military / wars

Some of these numbers are very lop sided.

bid the soldiers shoot's picture

DA BIG BUBBLE WEREN"T BURSTED

 

lordy lordy those were the daze

JamaicaJim's picture
  • No iPhone. Steve Jobs unveiled the first iPhone in January 2007, and it didn’t ship until June of that year.

iCrapple? Fuck that shit

  • No Facebook (unless you were in college at the time). Facebook only opened to the general population in September 2006.

Fartbook? Fuck that shit.

  • No Twitter. The full version of the product launched in July 2006.

Twatter? Fuck that shit.

  • No Instagram. The picture sharing site only launched in 2010.

Instashit? Fuck that shit.

  • No Kim Kardashian. “Keeping up With The Kardashians” debuted in October 2007.

SHOOT that fat, worthless piece of shit!

  • No Uber. The company received its seed funding in 2009.

I drive meself...fuck that shit.

  • No iPad. Apple started taking pre-orders on the first-gen product in March 2010.

More iCrapple??? Fuck that shit.

No....the only REAL CHANGE is that we now have a fucktwat and his band of muzzie loving douchebags installed in the WH.