Anyone can blindly stare at an S&P 500 chart and say that stock values are at absurdly high levels, therefore everyone should sell before it all comes crashing down. Historically, however, the stock market has always produced a positive annual return over the long run. Maybe those buy and hold preachers aren’t just blowing smoke, maybe they’re really on to something. After all, they have Warren Buffet on their side.
To get a better view of stock market performance over the long run, I like to use the annualized rolling average. The charts below show what your annual return would have been over various lengths of time, on a rolling basis. Meaning, if I purchased one share of the S&P 500 in 1900 (yes, I realize it didn’t exist then), what would it have been worth in 1905? How about 1901-1906, or 1902-1907. If you carry these calculations out all the way to current, you’ll have the 5 year rolling average of the market. Then do it again for 10, 20, and 30 years. That’s a whole lot of calculations.