Looking Good at 100
This week marks the 100th edition of Alger On the Money, a program that strives to offer valuable insights and education to our clients. In honor of this milestone, we look back on a century of earnings growth and the stock market returns it has driven.

  • At Alger we are fond of Benjamin Graham’s remark, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” In the chart above, the stock market has clearly weighed earnings by increasing in value right alongside earnings per share (EPS) over the past 100 years. 

  • The S&P 500 has returned approximately 10% annually over the past century. An investment of $1,000 at the beginning of 1918 would be worth more than $20,000,000 as of the end of 2017. The question investors are asking today is what should they expect in the future? Alger considers starting P/E ratios to be the best predictor of equity market returns (see Alger On the Money “The Single Greatest Predictor of Future Stock Market Returns”), and if historical correlations between starting valuation and 10-year returns continues in the future, we estimate that annual S&P 500 returns for the next ten years would be approximately 7%, attractive relative to our view of prospective fixed income returns. 

  • Thank you for reading our weekly commentary; we hope you find it beneficial. Here is to the next 100 years of strong earnings and interesting, new editions of Alger On the Money.


The views expressed are the views of Fred Alger Management, Inc. as of October 2018. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. 

Risk Disclosure: 
Investing in the stock market involves gains and losses and may not be suitable for all investors. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Many technology companies have limited operating histories and prices of these companies' securities have historically been more volatile than other securities, especially over the short term. Technology companies may also face increased competition, government regulation, and risk of obsolescence due to progress in technological developments. 

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