5 December 1996: Greenspan warns of irrational exuberance
In a speech in Washington, Fed chairman Alan Greenspan asked how we would know when irrational exuberance had unduly escalated asset values. Markets in Asia and Europe fell overnight, and US stocks dipped at the open. But the bull market roared on for more than three years, with the Nasdaq more than tripling. Greenspan was eventually right, just very early.
The lesson: Being early on a bubble call can feel exactly the same as being wrong.
What it meant for investors
$1,000 in S&P 500 index fund at the start of 2000 → $4,626 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2000, the first year in our price data after the event. That is 4.6 times the money, but $0 less than a plain index fund made over the same years.
What S&P 500 index fund teaches: Owning the whole market removes the risk of picking the wrong company but not the risk of a lost decade, so time horizon matters as much as diversification.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2000 | $1,470 | $4,626 | $4,626 |
| 2003 | $880 | $7,727 | $7,727 |
| 2005 | $1,180 | $5,763 | $5,763 |
green = beat the S&P 500 · red = lost money
What if you bought S&P 500 index fund? Every starting year and the full story →
More S&P 500 index fund history
- 5 February 2018: Volmageddon: the Dow drops 1,175 points
- 19 February 2020: The S&P 500 hits a record before COVID
- 29 February 2020: The US reports its first COVID-19 death
- 3 March 2020: The Fed makes an emergency rate cut
- 6 March 2009: The S&P 500 touches 666
- 9 March 2009: The bear market bottoms
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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