facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog search brokercheck brokercheck
%POST_TITLE% Thumbnail

MCF Insights: What Would A 20-Year Bull Market Look Like?

It sure would add a lot to our average 401(k) balances


In March 2019, this bull market celebrated its 10th birthday and now sits a whisper below its all-time high. Born from the financial crisis in March 2009, the S&P has delivered a staggering total return north of 400% to investors.

And although this bull market is elderly by historical standards and is still more than two years away from being the longest bull market on record, ask yourself: What would a 20-year bull market look like?

Current 10-Year Bull Market 

Before we answer that question, let’s keep some perspective on the current bull market:

  • The markets dropped about 60% during the financial crisis and then the bull came out of the gates fast, jumping 37% in the first two months and 69% in its first year1
  • Its best calendar year was 2013 when it gained 32.4%, followed by 2009 (+26.5%) and 2017 (+21.8%) 
  • 2018 was its weakest year (down 4.4%), breaking its streak of nine straight positive years
  • This 10-year bull has grown by an average rate of 17.7% per year

For perspective, the long-term average annual return of the stock market has been roughly 10%.

Average 401(k) Balances by Age 

It should not surprise you that 401(k) balances increase with age.2 Below are the numbers from Fidelity’s retirement study:

Ages 20-29: Average 401(k) balance: $11,600 

Ages 30-39: Average 401(k) balance: $43,600 

Ages 40-49: Average 401(k) balance: $106,200 

Ages 50-59: Average 401(k) balance: $179,100

Ages 60-69: Average 401(k) balance: $198,600

What Does a 20-Year Bull Market Do?

Let’s have some fun and assume that this bull market grows by 12% per year – which is considerably less than its current 10-year run of 17.7% per year and slightly more than the 10% long-term average annual return of the market. 

And to make it more real, let’s assume that $500 per month is added – which is incidentally about 1/3 of the maximum annual allowance of $19,000 per year for 2019, up from $18,500. 

Note that if you are 50 and over and looking to add more, the catch-up contributions will remain the same for 2019, allowing you to add an additional $6,000 to your 401(k).

Although we will all be a decade older, here are what those average account balances would grow to if we enjoyed 10 more years of this bull market:

Ages 20-29: Ending 401(k) balance: $148,045.72

Ages 30-39: Ending 401(k) balance: $247,432.94 

Ages 40-49: Ending 401(k) balance: $441,858.98 

Ages 50-59: Ending 401(k) balance: $668,275.41 

Ages 60-69: Average 401(k) balance: $728,839.21

Of course, this is for illustrative purposes only and does not include pesky items like fees, taxes and inflation. 

What Else Can We Expect in a 20-Year Bull? 

Let’s examine the most recent 10-year bull so that we remember that even if it grows into a 20-year bull, it won’t be a straight line up. Consider that this bull:

  • Has delivered six 10% corrections, with the largest coming late last year (down 19.8%) and in 2011 (down 9.4%)
  • It went nearly four years without a 10% correction (2011-2015) and 2017's largest intra-year decline was a paltry 2.8%
  • Generally speaking, drops of 10% in the S&P 500 occur about once per calendar year

Is a 20-Year Bull Realistic? 

The short answer is: no one knows. Repeat that out loud: nobody knows. 

But, history does consistently show us that bull markets are fueled by the fundamental combination of economic growth, rising corporate profits, and favorable interest rates – all of which mostly exist in the current environment. 

Corporate earnings are slowing, but are still strong, consumer optimism is solid, interest rates are favorable, and unemployment numbers are at 50-year lows. That doesn’t mean everything is rosy, however. In fact, there are still plenty of global and political risks to worry about. 

This is why we look at your asset allocation every year (or when you have had a significant life change). With advances in certain asset classes and declines in others, we need to make sure your asset allocation is aligned with your goals and risk tolerance.

And no matter where your current 401(k) balance resides today, make sure you and your financial advisor explore what a 20-year bull market might do for your goals. Contact an MCF Consultant to discuss how to best achieve your goals.

MCF has published this article with permission from Financial Media Exchange.

1 Condon, Bernard. “Born out of the Financial Crisis, Bull Market Nears Record.” AP NEWS, Associated Press, 20 Aug. 2018, www.apnews.com/22e6e7de23104b09949b869eccef6f0c.

2 Shamrell, Mike. FIDELITY Q4 2018 RETIREMENT ANALYSIS: MARKET SHAKE-UP IMPACTS ACCOUNT BALANCES, BUT INVESTORS “STAYED THE COURSE” DESPITE VOLATILITY. Fidelity, 31 Jan. 2019, www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/fidelity-q4-2018-retirement-analysis-013119.pdf.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.   MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please click here to review our full disclosure.