Federal funds rate data was not available before July 1954. ... Over the past 68 years, bull markets have lasted longer
Invest for the long term
Bull markets Bear markets
To pursue the greater return potential of stocks, it makes more sense to stay committed to an investment plan rather than try to guess the best time to be in the market. Over the past 68 years, bull markets have lasted longer (45 months on average) than bear markets (14 months on average) and have more than made up for the periodic market declines. Bull markets have begun during economic recessions and expansions and at all levels of rates. And while it is impossible to predict when a bull market will begin, it is possible to miss one by waiting on the sidelines. 600% R 550% 500%
E
R
E
R
E
R
E
R
E
R
E
R E
R
E
R
E
Recessions Federal funds rate
R
24%
E
91 months
Percent change of the S&P 500 Index for each bull and bear market since 1949
407%
19 months
14 months
43 months
26 months
30 months
27 months
61 months
29 months
60%
39%
90%
52%
76%
86%
281%
59%
350%
Federal funds rate is the interest rate at which private banks lend money for overnight loans. The Fed generally raises the target federal funds rate to slow economic growth, and lowers the rate to facilitate growth.
22%
526%
20% 18% 16%
Federal funds rate
% Change in S&P 500 Index
R
Expansions
R
118 months
450% 400%
E
E
14%
300%
12%
250%
56 months
26 months
61 months
100%
94%
100%
33 months
200%
8%
87%
150%
10%
6%
100%
4%
50%
2%
YEARS ’49 ’50 ’51 ’52 ’53 ’54 ’55 ’56 ’57 ’58 ’59 ’60 ’61 ’62 ’63 ’64 ’65 ’66 ’67 ’68 ’69 ’70 ’71 ’72 ’73 ’74 ’75 ’76 ’77 ’78 ’79 ’80 ’81 ’82 ’83 ’84 ’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
-50% -100% -150%
-14%
-8%
-22%
-16%
-29%
-43%
-14%
-17%
-24%
-15%
-43%
-51%
-7%
17 months
15 months
6 months
8 months
19 months
21 months
14 months
20 months
4 months
5 months
30 months
16 months
7 months
Sources: National Bureau of Economic Research, Ibbotson Associates, The Federal Reserve Bank of St. Louis, Putnam Investments, 2016. Data is as of 12/31/16, is historical, and reflects reinvested dividends. Past performance and market conditions do not guarantee future results and may not be duplicated. The S&P 500 Index is an unmanaged index of common stock performance. It is not possible to invest directly in an index. Federal funds rate data was not available before July 1954. A bull market is here defined as a period when the stock market rises for at least four straight months. A bear market is defined as a market decline of at least four months.
The stock market can provide long-term returns The market has always recovered Over the past 68 years, there have been 13 bear markets, lasting an average of 14 months and declining a total of 24.6% before recovering. By contrast, the 14 bull markets since 1949 have lasted roughly 45 months on balance, each growing an average of 120.6%.
Investors who stay the course can benefit Although selling may feel better in times of market turbulence, the fact is that market gains have more than made up for losses for those investors who stay invested over time. A $10,000 investment in the S&P 500 Index in 1996 would have grown to $43,933 by December 31, 2016, despite the 51% downturn of 2008–2009. Please keep in mind that returns for other periods may have been less favorable and that other market segments may not have recovered from this downturn.
Bull markets versus bear markets 12/31/48–12/31/16 Bull
Bear
14
13
% of time in economic recessions
48%
52%
% of time in economic expansions
83%
17%
45
14
Average annual return
23.3%
-21.5%
Average cumulative return
120.6%
-24.6%
Occurrences
Average length (months)
Source: Putnam research. Data illustrated using S&P 500 Index.
The average mutual fund investor left a considerable amount of money on the table by failing to take a prudent, long-term approach. Source: DALBAR, Inc. Quantitative Analysis of Investor Behavior, 2016, for the period ended 12/31/16. Most recent data available.
Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing. Putnam Retail Management
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