2013 Stock Market Performance

Every investor knows this has been a great year for stocks. But it might surprise you just how strong the 2013 stock market performance has been.
As of this writing, the S&P 500 has gained 26.8% in 2013. With three trading weeks still to go, that makes this the best year for the benchmark U.S. index in the 21^st century. The only year since the turn of the century that was even close is 2003, when the index gained 26.4%.
Barring a complete collapse, this will be either the best or the second-best year for stocks this century. It’s also on track to be the best year for stocks since 1997, when the S&P returned a hefty 31%.
In fact, as it stands right now, only three years since 1975 have been better than this one: ’97, 1995 (with a whopping 34.1% return in the S&P), and 1989 (27.25% return). Those two years in the ‘90s are probably untouchable right now. But 1989 is within reach.
The performance in the Dow Jones Industrial Average has also been impressive, though not quite as historic. To date, the index is up 22.3% in 2013 – best since 2003. The index isn’t likely to eclipse the 25.3% return from that year.
Of the three major U.S. indices, the Nasdaq’s 2013 returns have been the most impressive. The tech-heavy index has risen 34.5%. Amazingly, that number is still well off the 44% returns in 2009 and the 50% gains in 2003.
What makes the strong 2013 stock market performance more improbable than past years is the current economic conditions. While the 7% unemployment rate is a marked improvement from the 10% rate in 2010, it’s still relatively high on a historical basis. For instance, from 1986 to 2009, the unemployment rate exceeded 7% in only two years.
In 1997, the last time the S&P’s returns were this high, only 5.3% of American people were out of work. The rate was 5.6% in 1995 and 5.4% in 1989.
GDP growth is also lower than it was throughout much of the mid-‘90s and early 2000s. The 3.6% growth in the third quarter was ahead of the 3.24% U.S. average since 1947. However, it trails the 4.7% average from 1997.
The U.S. economy is clearly improving – especially when you consider that we’re still just four years removed from the worst recession since the Great Depression. But the stock market returns have been even better than you’d expect in an economy that is still below par on a historical basis.
Let’s celebrate the remarkable 2013 stock market performance … and hope that it carries over into 2014.

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