Are Long-Term Returns Always Above Inflation? — My Money Blog

If you’d like a little bit of comfort as a long-term owner of stocks, check out this chart from Ben Carlson at A Wealth of Common Sense. He looks at every rolling 22-year period (based on a reader request) between 1926 to 2023, and finds that the minimum return during any 22-year period is still 1.4{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} above inflation. The average is a pretty impressive 7.2{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} above inflation.

Another interesting takeaway from this chart is that the enemy of after-inflation returns is not necessarily an intensely traumatic event like the Great Depression or World War II or the Great Financial/Housing Crisis, but also an extended period of high inflation. The worst real return period was around the 1970s:

Surprisingly, the worst 22 year period for real returns was not in the aftermath of the Great Depression but rather in the 1970s. The two-plus decade real return ending in the summer of 1982 was just 1.4{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} per year. That time frame featured an annual inflation rate of nearly 6{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} which is a high hurdle rate to beat.

Here is the a similar chart, but not adjusted for inflation.