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The Lost Decade, Revisited

September 29, 20222 Min Read
September 29, 2022
2 Min Read
lost decade, revisited

Michael E. Schroer, CFA



The stock market weakness thus far this year has triggered memories of the so-called “Lost Decade for Stocks,” and some predictions that another lost decade is ahead of us.

The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500® generated an annualized total return of -0.9% over the period. This was only the second time that the market actually had a negative total return over a decade period. The other period was the Great Depression decade of the 1930s.

Growth of $1 Invested From 12/31/1999 – 12/31/2009
lost decade
1 Annualized return

Sources: Renaissance Research, FactSet

The U.S. stock market has been top-heavy with few large companies, primarily in tech, driving returns for several years. Now may be an especially good time to diversify away from concentrated indices and, instead, consider high quality, reasonably priced growth opportunities. 

The 1999-2009 period was marked by the collapse of the late dot-com bubble, the 9/11 terrorist attacks, the Iraq and Afghanistan wars, as well as two recessions, the deepest being the 2008-2009 Financial Crisis. Importantly, the trailing P/E multiple of the S&P 500 was over 29x at the end of 1999 (compared with only 19x today). With all of those headwinds, it isn’t surprising the S&P 500 struggled to post any gain. 

However, a deeper look at the stock market over that period provides a better perspective on its rate of return. For example, the S&P 500 calculated on an equal-weighted basis posted an annualized total return of 5.1% over the period, 6.0% higher than the cap-weighted version of the Index. While a dollar invested in the cap-weighted S&P 500 at the end of 1999 declined to 91 cents by the end of 2009, a dollar invested in the equal-weighted index would have grown to $1.64 (+64.0%, unannualized).

Total Returns: 12/31/1999 through 12/31/2009
lost decade
Past performance is not indicative of future results. Performance for periods of one year or less is not annualized. All returns are shown in U.S. dollars.

Sources: Renaissance Research, FactSet


The stocks in each version of the index are identical, but the equal-weighted approach would have avoided some of the disappointing performance posted by very large cap stocks over the decade and invested more in medium-sized stocks in the S&P 500 Index that experienced better growth. Similarly, investing in mid cap or small cap stocks would have generated good total returns as well, resulting in end-of-period values twice the value of investing in the S&P 500.

A “lost decade,” while historically rare and unlikely, is still very concerning to contemplate. However, diversification across various market capitalization ranges of U.S. stocks may provide additional possibilities for returns above that of simply the cap-weighted S&P 500.

Michael E. Schroer, CFA



The stock market weakness thus far this year has triggered memories of the so-called “Lost Decade for Stocks,” and some predictions that another lost decade is ahead of us.


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Past performance is not a guarantee of future results.

This Market Update reflects the thoughts of Renaissance as of September 15, 2022. This information has been provided by Renaissance Investment Management. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision, nor should it be considered a recommendation. The views and opinions expressed are those of the Chief Investment Officer at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.

If Renaissance or benchmark performance is shown, it represents historically achieved results, and is no guarantee of future performance. Future investments may be made under materially different economic conditions, in different securities and using different investment strategies and these differences may have a significant effect on the results portrayed. Each of these material market or economic conditions may or may not be repeated. Therefore, there may be sharp differences between the benchmark or Renaissance performance shown and the actual performance results achieved by any particular client. Benchmark results are shown for comparison purposes only. The benchmark presented represents unmanaged portfolios whose characteristics differ from the composite portfolios; however, they tend to represent the investment environment existing during the time periods shown. The benchmark cannot be invested in directly. The returns of the benchmark do not include any transaction costs, management fees or other costs. The holdings of the client portfolios in our composites may differ significantly from the securities that comprise the benchmark shown. The benchmark has been selected to represent what Renaissance believes is an appropriate benchmark with which to compare the composite performance.

The value of an investment may fall as well as rise. Please note that different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Investor principal is not guaranteed and investors may not receive the full amount of their investment at the time of sale if asset values have fallen. No assurance can be given that an investor will not lose invested capital. Consultants supplied with these performance results are advised to use this data in accordance with SEC guidelines. The actual performance achieved by a client portfolio may be affected by a variety of factors, including the initial balance of the account, the timing and amount of any additions to or withdrawals from the portfolio, changes made to the account to reflect the specific investment needs or preferences of the client, durations and timing of participation as a RIM client, and a client portfolio’s risk tolerance, investment objectives, and investment time horizon. All investments carry a certain degree of risk, including the loss of principal and are not guaranteed by the U.S. government.

(Indices are unmanaged and are not available for direct investment.)
S&P 500 Index—The S&P 500 Stock Index is a market capitalization weighted index and consists of 500 stocks chosen for market size, liquidity and industry group representation.
S&P Midcap 400 Index—The S&P MidCap 400 Index, is a capitalization-weighted index that serves as a gauge for the U.S. mid-cap equities sector.
S&P Small Cap 600 Index—The S&P Small Cap 600 Index is a capitalization-weighted index that measures the performance of selected U.S. stocks with a small market capitalization.

S&P Dow Jones is the source and owner of the trademarks, service marks and copyrights related to the S&P Indexes. S&P® is a trademark of S&P Dow Jones. This presentation may contain proprietary S&P data and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Renaissance Investment Management. S&P Dow Jones is not responsible for the formatting or configuration of this material or for any inaccuracy in Renaissance’s presentation thereof. This data is to be used for the recipient’s internal use only.


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