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A Comparison of Organic U.S. Stock Market Returns Since Inception

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This article aims to provide a historical perspective on the comparison of actual stock market returns, referred to herein as 'organic' growth, with other asset classes such as real estate and commodities versus holding cash. It does so by excluding the effects of bailouts, Quantitative Easing (QE), and inflation from consideration.


The current total U.S. stock market capitalization stands at approximately $49.653 trillion.


To calculate the organic rate of return of the U.S. stock markets, we must account for the factors that inflate the current valuation, including inflation, bailouts, and QE. By subtracting these considerations from the increase in market capitalization since the inception of the first American bourse, we can estimate the rate of organic growth.




From the earliest incarnation of the NYSE in 1792 to today, the dollar has experienced an average inflation rate of 1.51% per year, resulting in a cumulative price increase of 3,153.46%.


Bailouts and Quantitative Easing


As of December 9, 2011, the aggregate amount that the U.S. government spent on market bailouts was estimated at $29.616 trillion, according to a study by the Levy Economics Institute of Bard College.


According to Forbes, the Federal Reserve began using QE to combat the Great Recession in 2008. The central bank purchased more than $4 trillion worth of assets between 2009 and 2014 across three rounds of QE. During the pandemic starting in March 2020, the Fed committed to buying Treasury securities and expanded its repurchase agreements by $2 trillion to ensure market liquidity. By late 2021, the Fed's total QE measures, which were part of a $1.9 trillion stimulus package, had significantly increased its balance sheet. By May 2022, the Fed's assets had grown to $9 trillion, with total QE to date estimated around $10 trillion.


Historical Stock Market Growth


The earliest recorded organization of securities trading in New York can be traced to the Buttonwood Agreement. At that time, the securities market included state and federal bonds and the stock of the new Bank of the United States, which was capitalized at $10 million—a substantial amount considering the Federal Government revenues were only $4.4 million in 1791. By 1800, the estimated total U.S. market capitalization was around $100 million, which, when adjusted for inflation, is approximately $3.24 billion in 2024 dollars.


Calculating Organic Growth


When we account for the original market capitalization with inflation, the $29.616 trillion in bailouts, and approximately $10 trillion in QE, the valuation without organic growth is calculated as approximately $43 trillion. Subtracting this amount from a current market capitalization of $49.653 trillion reveals around $6.6 trillion in organic market growth since 1792. This equates to an average annual return of 0.66% or a compound annual growth rate of 0.062% over 232 years.


Comparison with Other Asset Classes:


Holding Cash

$100 held since 1800 would not grow, effectively losing out on the 3,153.46% inflationary growth, retaining the same $100 value in 2024.

Gold Prices

The official U.S. Government gold price started at $19.75 per troy ounce in 1792 and is $2,330 in 2024, representing a 11,800% rate of return or 8,650% adjusting for inflation.

Land Value

U. S. urban land value averaged $100 per acre between 1785 and 1805. At today's price of $511,000 per acre, this represents an increase of 197,000% after adjusting for inflation.


Growth chart.png




Comparing the overall annual organic market rate of return of 0.66% with the historical average annual return of the S&P 500, which is 6.94% over the last 150 years (accounting for compounding and reinvestment of dividends), shows a stark difference. It illustrates that over 90% of reported U.S. market growth results from U.S. Government intervention and inflation. This comparison highlights the significant impact of inflation, bailouts, and QE on the apparent growth of the stock market in relation to other asset classes and represents a unimpaired view of the truest measure of the success of capitalism.


This article is accurate and true to the best of the author's knowledge.

Content is for informational or entertainment purposes only and does not

substitute for personal counsel or professional advice in business,

financial, legal, or technical matters.

© 2024 AD Wilson