The total return on the S&P 500, including dividends, was 11.96 percent for 2016, the eighth straight calendar year of positive returns since the crash of 2008 and 2009. That means the S&P 500 produced a positive return during all eight years of President Obama’s administration.
An investment in the S&P 500 at the beginning of 2009 would have almost tripled by the end of 2016, increasing over 293 percent.
No other president in our history can claim a longer winning streak. Presidents Reagan and Clinton came the closest: The S&P 500 produced positive returns in seven of the eight years of their administrations.
The latest winning streak isn’t the longest, however -- that was nine straight years from the beginning of 1991 to the end of 1999, spanning the administrations of both the first President Bush and President Clinton. It remains to be seen if President-Elect Donald Trump can help keep the current winning streak alive for at least another year and beat the standing record.
The chart shows the annual returns (including dividends) in the S&P 500 since 1926, and helps you see the stock market’s various winning streaks.
The chart illustrates a significant “double-double” for the stock market. First, there are about twice as many up years as down. Second, the up bars go up about twice as much as the down bars go down, meaning that when the market went up, an investor typically made more money than they lost when the market went down.
It’s likely that if you’re invested in the stock market at all, you’ve read various market prognosticators who are making predictions about the market in 2017 and beyond. Some present compelling cases that the market and our economy will take off under the Republican regime, while other forecasters predict more doom and gloom.
Fortunately, if you’re investing for retirement, you can choose to ignore both sides of the fence and allow your long investing horizon to give you the time you need to ride out the downturns and wait until the market rises again.
If you’re already retired, creating a diversified portfolio of retirement income is one way to help insure your financial security. You should develop sources of retirement income that won’t drop when the market crashes, such as income from Social Security, bond ladders, and guaranteed annuities, which you can use to cover your basic living expenses. Then, when the market drops, you won’t need to move in with your kids.
To cover your discretionary living expenses, such as hobbies, travel, gifts, and spoiling your grandchildren, consider investing the rest of your savings in the stock market to generate a monthly retirement paycheck. The chart above should will encourage you to remain invested when the market drops and have the patience to wait for the market to bounce back. If you have your basic living expenses covered, as described above, hopefully you’ll have the patience to ride out any stock market crashes.
There’s also plenty of evidence to show that a low-cost index fund will beat most actively managed funds, so you don’t need to fret about finding the best mutual fund. The return on the S&P 500 should be good enough for your retirement stock investments -- you don’t need to take additional risks to try to beat the market.
With a strategy that balances safer sources of income with some investments in the stock market, you won’t need to worry about which prognosticator is correct. So spend the time necessary to design a thoughtful retirement investing strategy, then go enjoy your life.