S&P 500: Safety Over 5-yr and 10-yr Periods?

In a recent post, we studied 82 years of price change for the S&P 500.  One of our readers commented, “I read somewhere that over 80% of all five year periods dating back to the Great Depression has seen the market ahead; over 95% for ten year periods.”

That rule of thumb isn’t wrong, but it doesn’t give a full picture. Let’s add some dimension to the statistic.

Here are two semi-log price charts showing rolling 5-yr, 10-yr and 15-yr periods for the S&P 500 (proxies SPY and IVV) from 1927, and for the MSCI EAFE (proxies EFA and VEA) from 1987.

S&P 500:

There are periods of price loss with each of the 5-yr, 10-yr and 15-yr rolling averages for the S&P 500.

click images to enlarge

S&P 500 beginning of 1927

MSCI EAFE:

EAFE is a developed markets index with a shorter history, but it is fairly highly correlated with the US markets and probably will have long-term good and bad p