Five years after the equity bull market started, U.S. investors returned to stocks in 2013, just in time for the best relative returns versus bonds on record.
Exchange-traded and mutual funds investing in shares took in about $162 billion, the most since 2000, according to data compiled by Bloomberg and the Investment Company Institute. At the same time, the Standard & Poor’s 500 Index climbed 29 percent, beating government debt by 32 percentage points, the widest spread since at least 1978, according to data compiled by Bank of America Merrill Lynch and Bloomberg.
Companies in the S&P 500 are worth $3.7 trillion more today than they were 12 months ago following a year when Federal Reserve Chairman Ben S. Bernanke signaled the curtailment of economic stimulus. The bull market, born at the depths of the credit crisis, enters its sixth year fueled by zero-percent interest rates and conviction among investors that it’s finally safe to own stock again.
“The equity culture is not dead,” Joseph Quinlan, the chief market strategist at Bank of America Corp.’s U.S. Trust, said in a Dec. 13 phone interview from New York. His firm oversees $333 billion in client assets. “We kind of lost sight of the fact that equities still provide long-term good returns.”
The biggest rally since the 1990s is pulling annual gains back toward historical averages after the credit crisis wiped out $11 trillion in total U.S. market value. Everyone from Pacific Investment Management Co.’s Tony Crescenzi to MacroMarkets LLC’s Robert Shiller observed in 2009 that investors were no richer then than they were a decade earlier.
S&P 500 futures expiring in March were little changed at 8:55 a.m. in London today.
Including reinvested dividends, stocks lost about 1 percent annually from 2000 through 2009, data compiled by Bloomberg show. Adding the most recent four years brings the return to about 3.5 percent, compared with the 6 percent mean since 1900, inflation-adjusted data compiled by the London Business School and Credit Suisse Group AG show. The S&P 500 has returned 26 percent on an annual basis since March 2009.
“There are so many doom-gloomers that got this wrong,” Michael Strauss, chief investment strategist and chief economist at Commonfund Group in Wilton, Connecticut, said by phone on Dec. 19. His firm oversees about $25 billion of assets. “The fact that there are still a lot of perma-bears pounding the table probably gives more potential of the market continuing to have days of upside surprises.”