Do Downturns Lead to Down Years?
Volatility is a normal part of investing. Market tumbles may be scary, but they shouldn’t be surprising.
Stock market slides over a few days or months may lead investors to anticipate a down year. But the US stock market had positive returns, despite some notable dips in many of those years.
Intrayear declines for the index ranged from 3% in 2017 to 49% in 2008. Many years with large intrayear declines saw positive annual returns. In 17 of the last 20 years, US stocks ended up with gains for the year (see Exhibit 1).
Volatility is a normal part of investing. Tumbles may be scary, but they shouldn’t be surprising. A long-term focus can help investors keep perspective.
EXHIBIT 1
Down but Not Out
Russell 3000 Index returns, with steepest declines within each year, January 2003–December 2022
Stock market slides may lead investors to anticipate a down year. But a broad market index had positive returns in 17 of the past 20 calendar years, despite some notable dips in many of those years.
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