Ten years ago Tuesday was a somewhat monumental day, at least for me. First, I saw The Cars live in New York City; it was the second-to-last show of their first tour in decades, and what turned out to be their last tour. On the way home, I tuned into the Phillies game, still going after 18 innings. Out of pitchers, the Phils turned to utility player Wilson Valdez to pitch the 19th inning. Valdez pitched a hitless inning and earned the win. This was an exceedingly rare event; Valdez became the first position player to start in the field and win as a pitcher since Babe Ruth in 1921. What a day.
That got me thinking about the past 10 years and what has transpired in the markets. Sometimes it's easy to forget where we've been, but in this case memories of the 2008-2009 market meltdown are still fresh. Some pundits at the time had been telling us to get used to low- to mid-single-digit returns.
I'm not sure I would have believed what the next 10 years would bring if somehow a crystal ball was able to forecast the outcome. The S&P 500 nearly tripled, rising 289%, which equates to about a 14.5% average annual return. The Russell 1000 Index averaged 14.58% per year during that time frame, and Russell 1000 Growth (17.2% average gain) trounced Russell 1000 Value (11.63% average gain) by 557 basis points per year.
You might presume that small-caps and microcaps did better than large-caps during that period, but that was not the case. Small-caps, as measured by the Russell 2000 Index, averaged a gain of 11.91% per year, while micro-caps (Russell Microcap Index) rose 12.47% a year on average. However, the spread between growth and value in Smallville was much smaller than that of large-caps. Russell 2000 Growth (up 12.87% per year) beat Russell 2000 Value (up 10.64%) by 223 basis points. But Russell Microcap Value (up 12.55% on average) actually outpaced Russell Microcap Growth (up 11.96%) by 60 basis points annually.
The 10-year Treasury was yielding a whopping 3.16% 10 years ago, more than double today's 1.56%. Gold was around $1,526 an ounce, 25% lower than the current $1,915. Silver, on the other hand, was smack dab in the middle of a hot run, at about $37 an ounce, or 24% above the current $28.19.
Now, for one of the more eye-opening stats: The S&P 500 was trading at about 15x trailing earnings versus the current 44x. That is an apples-to-oranges comparison to a certain extent, given that earnings over the past 12 months occurred during COVID and may be artificially low. The current forward price-to-earnings (P/E) ratio for the S&P 500 Index is around 21 versus about 11 ten years ago. The current S&P 500 price to book value (4.52) is more than double where it was 10 years ago (2.2).
I know that many believe the old fundamentals don't matter anymore (I'm not among them), but that is staggering.
What will the next 10 years bring?