Stock Performance After Downturns
Sudden market downturns can be unsettling. But historically, US equity returns following sharp downturns have, on average, been positive.
A broad market index tracking data since 1926 in the US shows that stocks have tended to deliver positive returns over one-year, three-year, and five-year periods following steep declines:
Fama/French Total US Market Research Index Returns, July 1, 1926 - December 31, 2021
Cumulative returns show this to striking effect. Five years after market declines of 10%, 20%, and 30%, the cumulative returns all top 50%.
Viewed in annualized terms across the longest, five-year period, returns after 10%, 20%, and 30% declines have been close to the historical annualized average over the entire period of 9.8%.1
Sticking with your plan helps put you in the best position to capture the recovery.