Over the past 10 years, the S&P 500 Index has returned a tidy amount of +13.35% per annum, outperforming other geographical regions, leading investors to wonder why they should be holding anything than the U.S. market.

However, if you review the long history of the American stock market, you will realise that in the past century, US markets actually gave you a return less than risk-free treasury bills about half of the time (1926 - 2012).

The years 1929-43 (15 years), 1966-82 (17 years) and 2000-12 (12 years) all have something in common.

If you had invested in the S&P 500 at the start of those years and held onto the investment for more than a decade, your returns would still have been lesser than investing in risk-free treasury bills (analogous to Singapore short-term T-Bills) — not ideal considering the risk-return ratio you undertook.

What is also interesting is that preceding these dismal return periods, markets had stellar returns above the long-term average of about 10%.

1926 - 1928: 30.13% p.a.

1944 - 1965: 15.05% p.a.

1983 - 1999: 18.36% p.a.

And today, 2013 - 2024 (November): 14.99% p.a.

Now, what’s important to note is that investors should not draw the conclusion that they should be getting out of the U.S. market, but rather, incorporate a robust risk management system that focuses on the global opportunity set and on higher expected return drivers.

This is essential to driving good investment outcomes and avoiding a painful decade or more of dismal returns, even when you think you’re putting your assets on a winning horse.

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Is The US Market Headed For a Decade of Dismal Returns?

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