Morningstar - Q3 2022 - 41

EXHIBIT 1
A History of Crashes, Recoveries, and Rallies The U.S. stock market has made impressive long-term gains, overcoming many
large declines, most recently the Lost Decade and the COVID-19 crash.
Real Cumulative Value of $1 Invested in the U.S. Stock Market: January 1871-June 2022
Cumulative Real Value
Peak Cumulative Real Value
Logarithmic Scale
Peak-Trough
Trough-Recovery
Lost Decade
19
12
$100,000
$18,718
$24,872
10,000
2
Vietnam and Inflation
10
1,000
20
13
2nd
Part of Great Depression
and World War II
100
6
WWI and Influenza
5
1
17
15
16
14
11
1
1870
1880
1890
1900
Sources: See footnote 2. Data as of 06/30/2022.
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
18
9
8
4
Crash of 1929 and 1st
of Great Depression
Part
10
21
7
3
22
had bottomed out in January 2020. From then
through June 2022, it was up 7%.
A History of New Heights
EXHIBITS 1 and 2 update the exhibits from the
previous articles that show the history of
the U.S. stock market since 1870. Here, the data
go through June 2022.2
EXHIBIT 1 shows the cumulative value of $1
invested on Dec. 31, 1870, in the U.S. stock market
in constant 1870 dollars.3
It also shows for each
month the highest level of the cumulative value so
far. When cumulative value is below the peak
value and falling, the market is declining.
When it is below the peak value and rising, the
market is recovering. When the cumulative
value and the peak value coincide, the market is
rising to new heights.
Despite all the downturns we see in
EXHIBIT 1, some of which were quite long and
severe, $1 invested at the end of 1870 grew
to $18,718 in real terms at the end of June 2022
for a real annualized rate of return of
about 6.7%.
Crash of '29 and the Lost Decade
EXHIBIT 2 lists the 22 worst market declines in the
nearly 152-year history shown in EXHIBIT 1.
The chart shows the month at which the
cumulative value peaked before the decline, the
month at which the decline was at its worst
(the trough), and the month in which it reached
the previous peak.
Not surprisingly, the largest decline occurred with
the crash of 1929 when the cumulative value
dropped by 79% and took four and a half years
2 In previous articles, I used the SBBI US Large Stock Index starting from January 1926. In this update, I use the SBBI series from January 1926 through December 1991 and the Morningstar US
Large Cap Index from January 1992 through June 2022. From January 1926 through June 2022, I used the SBBI US Inflation Index series to get real, or inflation-adjusted, returns.
3 Each month, the cumulative value is the previous month's cumulative value times 1 plus the month's real total return.
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Morningstar - Q3 2022

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Morningstar - Q3 2022 - Cover1
Morningstar - Q3 2022 - Cover2
Morningstar - Q3 2022 - 1
Morningstar - Q3 2022 - 2
Morningstar - Q3 2022 - Contents
Morningstar - Q3 2022 - 4
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