Here’s the Truth About the Stock Markets

By Sallie Krawcheck

These markets aren’t a lot of fun.

So let’s escape for a moment. Let’s assume it’s the year 1900: William McKinley is president, the Temperance movement is underway, long dresses are still in fashion.

What if you were thinking of investing in the stock market during that year?

And what if I had told you that, over the next 120 years, the US would experience two world wars, one Cold War, numerous regional wars, one Great Depression, one Great Recession, inflation, stagflation, oil shocks, the flu pandemic of 1918, terrorist attacks on US soil, two presidential impeachments (and one resignation pre-impeachment), several real estate bubbles and bursts, an internet bubble and burst, the election of an actor and a reality star as president, numerous hurricanes, fires, earthquakes, blizzards … you get the point.

So you’re in your long dress, drinking lemonade, at the beginning of 1900. You’re thinking of investing $1,000 in the US stock market. How much does Old-Timey You guess your money might be worth at the end of 2019?

I’ll bet Old-Timey You didn’t guess $58,191,000.*

That’s not a typo: $58,191,000.

Still not a typo: $58 million.

Over that period of time, the equity markets had an average annual return of 9.6% **, with some years as good as 56% and some as bad as -39%.

The key lessons here are that the US economy is resilient, even with external shocks and challenges. And that staying invested for the long term — to allow the “mathemagic” of compounding to do its work — has historically been the key to building wealth.

But still, the past week and a half has been no fun.

It is said that “the markets” hate uncertainty … and there has been plenty of that: How bad will the coronavirus be? How many people will get sick? How much will it impact the US and global economy, and for how long?

Things went from “This doesn’t seem that bad” to “This feels like it could be really bad” very quickly, with the stock market registering its fastest 10%+ decline since the Great Depression. And, with US real long-term interest rates lower than Japan’s, the bond market all of a sudden seems to be “telling us” that the US will have lower long-term growth than Japan will.


I’m not a doctor, and I never try to “time the market.” But my guess is that coronavirus will slow the economy for some period of time, but not in the long term — and not enough that the US’s long-term growth rate is below Japan’s (which has a much older population and a much less dynamic economy).

Such are “the markets.” They’ve historically been efficient over the long term, but they can freak out or get overexcited in the shorter term. (This short-term emotion is another reason to invest for the long term.)

Our advice?

  • Know that Ellevest invests you in a diversified investment portfolio — not all stocks, not all bonds — based on your personal circumstances and goals. (And while stocks went down last week, bonds went up in value. That’s why diversification rocks.)

  • Try not to watch too much TV. Just as MSNBC lives for the drama of politics, so CNBC lives for the drama of market volatility. It’s in their interest to hype market moves and drive up their ratings. Don’t buy into it.

  • If you’re young, happy dance. Stocks are “on sale” compared to where they were a few weeks ago, and — just like Warren Buffett — you are a “net buyer” of stocks for a long time to come. While psychologically, it feels good when the market goes up, financially it can be better to buy stocks at lower prices. (If you’re middle-aged, happy dance too. Same reasoning. Just not as many years of buying stocks.)

Sallie Krawcheck Signature


Ronald Reagan.

Donald Trump.

Past performance is not a guarantee of future results. Ellevest does not currently support time travel.

H/T to Warren Buffett (the greatest investor of our time) on this line of thinking. I heard something similar from him at a conference.

Source: Credit Suisse Global Investment Returns Yearbook 2020, their calculation (PDF download here, Figure 12.)

These are nominal returns on the equity markets from 1900 to 2019, as calculated by Credit Suisse. (FYI, we gave you a link to where you can see more info, but you’ll need to download the PDF from the link.)

BTW, if you’re super eagle-eyed and noticed that we have previously said 9.7%, that’s because we usually quote returns of the S&P500 as a stand-in for the entire stock market. This time, we wanted to go back to 1900, and the S&P didn’t exist before 1928, so it’s slightly different. Also, we’re impressed.

55.8% in real terms, in 1933.

-38.6% in real terms, in 1931. What a couple of years that was.

© 2020 Ellevest, Inc. All Rights Reserved.

All opinions and views expressed by Ellevest are current as of the date of this writing, for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.

Information was obtained from third-party sources, which we believe to be reliable but not guaranteed for accuracy or completeness.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

The practice of investing a fixed dollar amount on a regular basis does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.

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Sallie Krawcheck

Sallie Krawcheck is the Co-Founder & CEO of Ellevest. Her life’s mission is to help women to reach their financial and professional goals.