U.S. Stocks: 1 Milestone That Matters

U.S. stocks fell today, as the lost 0.50%, while the narrower, price-weighted lost 0.55%. For the Dow, that put an end to a 20-week streak of winning Tuesdays -- the longest "weekday" streak in the history of the index. Some journalists, pundits, and strategists will try to explain why that is meaningful, but it simply isn't. If you're not clear on why, allow me to recommend this column by The Wall Street Journal's esteemed Jason Zweig.

There are milestones that are worth reflecting on and one of them occurred exactly 45 years ago today. On June 4, 1968, the S&P 500 index closed above 100 for the first time ever, with a closing print of 100.38. It had taken the index roughly 10 years to double, and it would take another 17 to double again.

Based on that observation, I thought it would be interesting to look at the time it took for subsequent "doubles," through the most recent relevant index milestone -- 1,600 -- which occurred only a month ago. This is how the figures shake out:

Source: Wikipedia and author's calculations.

What the table points at is the cyclicality of stock returns. The march from 100 to 200 was a terrible slog that must have seemed interminable to investors. The 1970s were not a favorable environment for stocks. That was followed by two "doubles" in rapid succession, from 200 to 400 and then on to 800, with an average period of less than six years. The secular bull market that began in 1982 was under way!

Where do we stand today and what does that presage for the future? By breaking 1,600 in May, we've just completed another "double," but this one was hard fought -- at more than 16 years, it took nearly as long as the one that lifted stocks past 200. How long until the next one? In other words, how long before we witness the S&P 500 at 3,200? Barring the influence of any extraordinary factors, I think investors will have done well if that occurs over the span of a decade (assuming normal levels of inflation), which would equate to a 7.2% annualized price return... but it could very well take longer. Still, don't forget there are also dividends to be counted in your total return.

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The article U.S. Stocks: 1 Milestone That Matters originally appeared on Fool.com.

Fool contributor Alex Dumortier, CFA and The Motley Fool have no position in any stocks mentioned. You can follow Alex on LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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