The Most Important Chart You'll See This Year
When 1 Picture is worth a 3k word substack post
Bold claim - The year is only 2 weeks old, but this chart is most certainly the most important one you see this year.
There is something like 275 million American adults living in the USA. As in 275,000,000. And there is likely somewhere in the same number of different opinions on the US Stock market.
This is especially true coming after a nice bull run.
Everyone has made good money who was invested in the market.
Look at the below chart, the SP500 is at all time highs. Since coming out of the GFC in 2009 the market is up more than 6x. That is a 12.5%-ish annualized return and a large chunk of it has come in the recovery since the pandemic.
And (arguably) those that did the most 1-dimensional thinking have absolutely crushed it recently.
Buying the biggest tech names:
All the trendy stocks ripped as well. Palantir, Microstrategy, and Red Cat were all popular and ripped 300% to 1,000% last year.
Everyone left 2024 feeling like a stock market genius.
However, the historical long-term return of the US stock market has been in the 7-8% range. Which means there are 2 possible conclusions to draw from the last 10+ years of an annualized 12.5% return (closing in on double the historical long-term rate):
We are in a new regime where US domestic stocks just continue to outperform the long-term historical return
We will eventually see returns under 7-8% to get back in line with the historical growth rate
There is a case to be made for both options. For example, if you think recent tech advancements are going to shoot productivity of companies way up leading to a sustained economic boom, you are likely more in camp #1. You think the 12%+ recent returns are sustainable as more and more companies lean into new tech to gain efficiencies and boost profits.
If, for example, you see all the new tech being like the dot com bubble and more likely markets have overshot, you would be in camp #2.
Well there is 1 chart floating around that make a pretty convincing case - at least to me. It visualize a lot of what feels intuitive - again to me.
This week we will break it down and talk a bit about what you can do to better position yourself if it also makes sense to you.