Can Stocks Fall Two Years In A Row?
It’s common for conservative investors to become fearful after a year of awful performance in the stock market. Last year certainly qualifies; it was the seventh worst year for the S&P 500 since 1926. Could 2023 also turn out to be a bad year for stocks? Of course anything is possible. But two down years in a row for the S&P 500 is quite uncommon.
The last time the S&P 500 fell two years in a row was during 2001, when the index returned -11.9% following a -9.1% loss in 2000. In fact, it dropped three years in a row that time, with 2002 being the worst of the three (down -22.1%). You may remember that period as the “Dot Com Bust.”
Prior to that, you have to go all the way back to 1973-74 to find another double-year decline.
The S&P 500 also experienced negative returns three years in a row from 1939 through 1941, although the 1939 return – negative 0.4% – should really be considered flat.
The only other time since 1926 that the S&P 500 experienced multiple years of losses was during the Great Depression. It was down four years in a row from 1929-1932.
In summary, over the last century multi-year stock market losses occurred only four times. Although we can’t know what will happen in the future, if history is any guide, 2023 could turn out well. It’s certainly off to a good start, up over 6% so far as of this writing!
And if you’re still worried about investing in stocks this year, you might consider expanding your time horizon viewpoint. The S&P 500 may have lost 18% in 2022, but over the past two years (2021-22) it gained over 14% cumulatively. There are not many asset classes that provide that kind of return.
It’s always important to remember that we invest in the capital markets for long-term growth, not for short-term windfalls.
(Artie Green is founder of Cognizant Wealth Advisors , dba Perigon Wealth Management, LLC, a registered investment advisor.)