Last decade was the worst ever in the stock market

Jay Bookman
Dec. 28, 2009

The U.S. stock market is wrapping up what is likely to be its worst decade ever.

In nearly 200 years of recorded stock-market history, no calendar decade has seen such a dismal performance as the 2000s.

Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade….

This past decade looks even worse when the impact of inflation is considered.

Since the end of 1999, the Standard & Poor’s 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University.

After the 2004 election, you might recall, President Bush decided to spend his “mandate” pushing a scheme to privatize Social Security and encourage investment of retirement funds in the stock market. Many retirees — and many of those approaching retirement — lost a lot of their private nest egg in the market collapse that began last fall, but the damage would have been greatly compounded had they invested a good portion of their Social Security funds in the market as well.

In addition, the political system would have been under great pressure to try to make good on some of that financial loss — i.e., a senior citizens’ bailout on top of the banking bailout and Detroit bailout and stimulus package. The Bush proposal was a symptom of that era’s attitude toward risk, with all attention focused on the possible upside and very little on the reality that big losses are inherent in the system too.