On this unique day, February 29^th, we leap into March.  Every 4 years we experience a Leap Year, and 2024 marks that time.  We can count on it happening in 2028 and 2032, etc. but please note that such regularity didn’t exist until 1582 when the Gregorian Calendar was instituted and more accurate calendar was invented (the world lost 10 days then – literally –  as when you went to bed on October 4^th 1582 and when you woke up it was October 15^th 1582, but I digress).  Being able to count on something feels good to us, and when it comes to money and our investments it might feel even more important.  Thus, this letter in this election year in this world of global tensions is to talk about regularity to settle your heart down.  The information shared below will also make you a better investor, which is the whole point of these letters.

Before we talk of regularity, it’s incumbent on us to talk about irregularity. What I’m talking about is the incessant volatility of markets, how markets shoot up and plunge down.  When markets drop we rationally feel “Dang…I shouldn’t be in!” with only slightly greater remorse than at the time when markets boom and we have the opposite emotional sentiment of regret in uttering “Ohhh…I wish I had more money in the market”.  It is because of these emotions that investors make the terrible mistake of selling low and buying high, unwise investor actions replete in history. Look at the attached slide which shows 98 years of returns of an index[i] that measures the rise and fall of the largest companies in the United States, which we call the Standard and Poor’s measurement of the stock prices of the biggest 500 companies (S&P 500).  You will note;

1. The largest decline was 47.07% in 1931
2. The largest increase was 46.59% in 1933
3. More recently we haven’t been pikers either as the index returns reveal;
   • Declined 38.49% in Calendar 2008
   • Was up 23.45% in 2009
   • Declined 18.1%[ii] in calendar 2022
   • Was up 26.3% In 2023

Terrible, right?  Well, no actually, not right.

In spite of this volatility – or what I’m TELLING YOU because of that market volatility – equity market returns have averaged 10%.  Look now at the table below, which shows you the remarkably consistent S&P500 returns (dividends reinvested) for the last 5 to 150 years[iii];

1. 150 year              9.26%
2. 100 year             10.54%
3. 50 year                11.13%
4. 30 year                10.03%
5. 20 year                9.69%
6. 10 year                12.02%
7. 5 year                  14.68%             

I want to emphasize how uncannily consistent those returns are for investors.  I’m a deep finance guy and even I will admit they are almost inconceivably regular.  Yet, please note that in the 98 years of recorded history on that graph that annual returns are SELDOM with 2% of that long-term regular.  In fact, they are only within 2% of the long-term return (say 8% to 12%) only 6 times!!  What is regular is the irregularity.

Let me summarize the above observations down to its two constituent parts;

1. The regular volatility (standard deviation) of markets that we should expect to cause us angst (or something is wrong with you)
2. The steadiness of market returns in spite of that volatility that we should capitalize upon to bring us success

This letter to you certainly doesn’t read as well as Dicken’s “A Tale of Two Cities” but your understanding of these two extremes of the same market has greater financial import.  It should also give comfort that with Wellspring you are invested to take advantage of this oft repeated but seldom appreciated financial history.

It remains my deep honor and privilege to serve you well.

Patrick Zumbusch
Founder and CEO

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[i] “Historical Stock Prices For The S&P500” (TradeThatSwing.com, February 25, 2024)
[ii] “S&P500 Index With Dividends Invested (Dimensional Fund Advisors, February 9, 2024)
[iii] Historical Stock Prices For The S&P500” (TradeThatSwing.com, February 25, 2024)