150 Years: Looking Back at S&P 500 Market Returns

Viewing 150 years of returns in a pyramid format helped me better abstract the arbitrary nature of the market’s performance.  Ranging from -50% to +50%, the market has clustered in the range of losing 20% to gaining 20% the majority of the years.  

However, note the different emotional reaction you get when you see the same information depicted in a graph with Index Value and Year on the two axis.

In this view, our brains are inclined to see patterns and trends. But when we see the same information depicted differently in a pyramid, we see the arbitrary variations. The pyramid view removes the linear ebb and flow our brains overlay when we see the graph over time.

That said, I find it fascinating the different emotional reaction when we see the data in shorter windows.  Take for example the reaction you get from the next image, intentionally cropped to cut off in March.  By the end of Q1 2025, and in the beginning of March of that year, sentiment was falling and the market was reacting accordingly. If one were asked, solely based on this chart, and without any other information, many would believe the market would continue to decline.  

Now consider the full view reflecting what actually occurred. The market rallied up 10.8%. 

So my conclusions are to view the data with different techniques and lenses. To view the data both in short term but also to zoom out and take in the full picture.  Emotions and innate biases such as recency bias are triggered by these views.  And therefore, I should inform myself with a variety of time durations to better sense long term trends.  And perhaps most importantly, take a long view to give me confidence that the future is bright and the long term trend is always historically positive.