Analysis
of S&P 500 Returns Since March 2009; Looking Ahead to 2026
By Victor Sperandeo with the
Curmudgeon
Introduction:
The remarkable S&P 500 bull
market run from March 2009 to date [1.] exhibits several notable characteristics.
The compounded annual return from December 31, 2008, to November 30, 2025,
stands at approximately 14.89%. The most
current 12-month win ratio is an incredible 90.63%.
Also, the U.S. equity market has
demonstrated strong resistance to negative global macro events/shocks, higher
inflation, and sharply rising interest rates over the last 16+ years.
While this performance is highly
significant, it has yet to surpass the historical multi-year S&P 500 record
of +17.88% compounded annually [2], recorded from December 31, 1981, to
December 31, 1999. That strong
two-decade advance was followed by the dotcom bust/ fiber optic wipeout. From
its March 10, 2000, high to its October 12, 2002 low, the NASDAQ composite
index declined by -78%. The S&P 500
declined by -49% during the same period.
.
.
Note 1. In Feb-March 2020 the S&P 500 price declined
~-34% due to COVID. The S&P dropped ~-25% from January 3, 2022 to October
12, 2022, due to high inflation and the sharp rise in interest rates. We are
not including those declines of > -20% in our analysis because they lasted
only a few months. In our view, U.S.
equities have been in a secular bull market since March 9, 2009, when the last
MAJOR bear market ended.
Note 2. S&P 500 returns stated are from Ibbotson
Associates.
.
.
A key insight from the current
bull run is the low maximum draw down of approximately -23.87% [based on month
end mark to market in 2022 and not counting the Feb-March 2020 COVID panic
decline]. That phenomenon was due to active Federal Reserve market interventions
that prevented real recessions while propping up financial markets. Heres a chart of the S&P 500 showing a
return of 634.04% which does NOT include dividends.
Historically, extremely positive
market performance often precedes significant downturns. For example, The U.S.
stock bull market of the 1920s saw the Dow Jones Industrial Average (DJIA),
increase about sixfold (roughly 500% gain) from 1921 to its peak in September
1929. U.S. stocks then experienced
consecutive annual losses from 1929-1932. Note that the S&P 500 index did
not exist at that time- it was officially launched on March 4, 1957.
The worst 10-year period for the
S&P 500 was from December 31, 1999, to December 31, 2008, resulting in a
-1.38% compound annual loss. For reference, the best and worst rolling Index
returns from 1973-2016 is here.
Investment Implications:
Our analysis suggests a "buy
and hold" strategy has been extremely profitable since March 2009,
especially when one considers taxes, high transaction taxes and related
factors. The maximum effective tax rate on capital gains (federal, net investment
income tax, and average state/local taxes) can be 28.8% for top earners,
potentially exceeding the maximum draw down experienced by simply holding the
S&P.
The practical costs for active
traders (taxes plus transaction costs) are substantial. If an investor NEVER sold the S&P during
this period, after tax gains were much higher than if trading in and out to
minimize draw downs (via market timing).
Keep in mind that selling at the
high and buying at the low is impossible. Also, there are bid-ask spreads and
commissions to consider. If an
intermediate term stock trader or money manager were among the best in the
world, they would sell -10% below the high to confirm a down trend and buy +10%
from the low to confirm an uptrend. Therefore, the true cost of buying and
selling is -28.8% +20% or -48.8% in actual and opportunity costs.
This is a primary reason why
Warren Buffets track record is so good; Victor estimates Berkshire Hathaways
long-term return since 1965 has been ~ +16% per annum.
Macroeconomic Outlook and
Market Positioning:
The current macroeconomic
environment, influenced by Federal Reserve interest rate policy and trade
tariffs, points towards potential future deflation. This outlook is supported
by declining employment data (4.6% unemployment rate as of Nov 2025) and alternative
inflation metrics such as the Truflation index (+2.48% YoY). Victor
believes the latter indexes provides a more real-time and data-rich measure of
price changes compared to the headline CPI (2.7% YoY).
Current M2 money supply growth is
moderate, at approximately 4.65% year-over-year as of October 2025. Thats a rebound from earlier lows, but below
long-term M2 growth rate averages (e.g. from 2000-to 2025 M2 growth averaged
6.3% to 6.83% per year).
Decreasing money and credit
availability (evidenced by commercial real estate challenges, and rising credit
card and auto loan delinquencies) is anticipated to negatively impact asset
valuations, including cryptocurrencies and equities, in the foreseeable
future.
Bitcoins recent sell-off - its down ~-30% since its
October 2025 all-time high - shows how quickly cryptocurrencies can decline.
Victor believes Bitcoins decline is due to future anticipated deflation, the
Feds interest rate policy and Trumps tariffs.
Based on this analysis, Victor
intends to initiate short positions on the NDX 100 in early 2026, while
maintaining long positions in gold and 5-year Treasury Note futures.
Key Takeaways from BofA
Fund Manager Survey:
.
Fund managers hold record low in
cash as sentiment hits four-year high. Cash levels have never been lower and
investor optimism has rarely been higher, according to the latest Bank of
America Global Fund Manager Survey (FMS).
l Most bullish FMS sentiment of past 3.5 years driven
by "run-it-hot" macro & policy expectations. See chart 2. below.
l Cash levels crash to record low of 3.3%. See Chart 1. and Elliott Wave chart below.
l Allocation to stocks + commodities highest since
Feb. 2022.
l BofA Bull & Bear Indicator @ 7.9 close to
"sell signal."
l Bullish positioning is the biggest headwind for
risk assets.
l BoAs broadest measure of FMS sentiment,
based on cash level, equity allocation, and global growth expectations, rose to
7.4 from 6.4, the highest level since July 2021.
l Asked about the most likely outcome for the
global economy in 2026
57% expect soft landing and 37% expect no landing,
while just 3% expect hard landing, the lowest level of past 2½ years.
l FMS global profit expectations have also
risen to the highest level since August 2021 (net 29%, up from net 13%).
l Asked how they rate market liquidity conditions
net
61% of FMS investors rated liquidity conditions across assets as positive, the
highest level since Sept. 2021.
Note since 2008, FMS investors
have only perceived liquidity conditions better than today were in Feb.
2021 and Sept. 2021, when global central banks were still buying large amounts
of bonds every month. Yet that is not
the case today!
FMS contrarian trades: long cash and bonds, short stocks and commodities;
long UK stocks, short Emerging Market stocks; long energy and consumer staples,
short tech and bank stocks. Source:
Michael Hartnett, BofA Global Research.
.
.
Longer term view of Mutual
Fund Cash, courtesy of Elliott Wave International:
Extremely low mutual fund cash is
a classic contrarian indicator of extreme optimism and a potential market top,
signaling a shift from "dry powder" to a highly invested, euphoric
state, suggesting a major market downturn (possible bear market) is likely to
follow.
Net U.S. Equity Mutual Fund
Outflows:
While the BoA FMS is extremely
bullish, U.S. equity mutual fund investors are apparently bearish! U.S. equity mutual funds have had NET
outflows (total redemptions > purchases & reinvested dividends) in each of
the last five weeks:
12/10: -26,973
12/03: -15,198
11/25: -17,815
11/19: -18,935
11/12: 20,997
Source: Investment
Company Institute
Mutual fund flows are often seen
as a barometer of investor behavior. Sustained outflows suggest investors are
becoming more cautious or risk-averse, potentially due to concerns over high
market valuations, the AI investment bubble, economic uncertainty, or
geopolitical tensions, and so have been reducing their exposure to U.S. stocks
by selling mutual fund shares theyve owned.
.
..
A Quote to Consider:
Proverbs 27:12 is written in the Book
of Proverbs, which is part of the Hebrew Bible and Christian Old Testament.
The verse Proverbs 27:12 states:
"The prudent see
danger and takes cover; but the simple keep going and pay the penalty."
This quote implies that wise
individuals are aware of potential dangers and take precautions to avoid them,
while those who are foolish or lack foresight may end up suffering consequences
for their actions. The verse emphasizes the importance of being cautious and
aware of one's surroundings to prevent negative outcomes.
.
Wishing you Happy Holidays,
good health, success and good luck. Till next time
.
The Curmudgeon
ajwdct@gmail.com
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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