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Does a Stock Market Downturn Lead to a Down Year? Thumbnail

Does a Stock Market Downturn Lead to a Down Year?

Stock market declines over a short-time period may lead investors to anticipate a down year. But as the chart below shows, the US stock market had positive returns in 17 of the past 20 calendar years, despite some notable dips in many of those years.


US Market Intra-Year Declines vs Calendar Year Returns, Jan. 2002 - Dec. 20211


  • Intra-year declines for the index ranged from 3% to 49%.
  • Many years with large intra-year declines saw positive annual returns. In 17 of the last 20 years, US stocks ended up with gains for the year.
  • Even in 2020, when there were sharp market declines associated with the coronavirus pandemic, US stocks ended the year with gains of 21%.


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.


David Rappaport, CFP®

David is the Co-Founder and Chief Investment Officer of Rappaport Reiches Capital Management. He acts as personal CFO to entrepreneurs and corporate executives, providing organization and clarity in their finances. Please connect with David below. He loves to talk about investing, financial planning, and Aspiritech, a non-profit hiring individuals on the autism spectrum.


The author does not intend to provide investment, legal or tax advice as these materials are for general educational purposes only. Please consult your legal, tax or investment professional for advice on your particular situation. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. It is not intended to be a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results. Please refer to RRCM’s Form ADV Part 2 for additional disclosures regarding RRCM and its practices.
Notes
1. Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. In US dollars. Data is calculated off rounded daily returns. US Market is represented by the Russell 3000 Index. Largest Intra-Year Decline refers to the largest market decrease from peak to trough during the year. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.