According to Investopedia, “all stocks around the world tend to rise in the long term.” They cite as evidence the performance of major common stock averages for a wide range of developed countries over the last 100 years. For example, selected data for U.S. markets point to a 10.2% average return for the S&P 500 from 1926-2019 and a 11.9% return for the Russell 2000 over the same period.
While specific data can be somewhat complex and subject to interpretation, the overall concept is generally correct. Increasing population, rising demand and inflation tend to combine to produce rising sales and earnings that lead to higher equity prices, over time.
Investors should be very aware that for this discussion, higher stock prices are being measured over long periods. Short-term fluctuations can be severe and largely impossible to consistently predict. Accordingly, it is important to review your objectives and risk tolerance with your advisor(s) regularly. There are a number of strategies that can, at least partially, mitigate the inherent risks in an investment portfolio.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA