![]() Losses are really the one constant across all cycles.įrey says in his talk that in stocks, “You’re usually in a drawdown state.” Obviously, the crash during the Great Depression stands out here, but look at how consistent losses have been over each and every decade or economic environment. Now here are those losses visualized in another way without the benefit of a log scale chart: First, here’s the long-term growth of the stock market with losses shaded in red: Frey presented a couple of different charts on the market to make his point. The natural follow-up question to this line of thinking would be - so what does stock market data going back to the 1800s really tell us?Ī reader sent me a link to a video of a presentation given by former hedge fund manager and quant Robert Frey (whose firm was actually bought out by legendary hedge fund manager Jim Simons in the 90s) called 180 Years of Market Drawdowns.įrey discusses the many changes that have taken place in the stock market over the years - the creation of the Fed, monetary policy, fiscal policy, the end of the gold standard, tax rates, valuations, the industry make-up of the markets and a number of other things.īut there has been one constant going back all the way to the early 1800s - risk. Namely that you have to take market returns that go back to the turn of the 20th century with a grain of salt because of the fact that costs were much higher in those days so no one was really receiving those gross returns on a net basis. “We tend to be inadequate historians.” – Robert FreyĪ couple weeks ago I covered a little discussed topic involving the use of historical market data.
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