We’re quickly closing in on a 30% gain for the calendar year.
How rare is that feat?
It happens more often than you would think.
Here’s a look at every calendar year return on the S&P 500 going back to 1928:
The 30% gains are highlighted.
By my count, there were 18 years in which the stock market finished with a gain of 30% or more. So that’s roughly 20% of the time or one in every five years.
There were also 7 years in which the S&P 500 finished the year in the range of 25% to 30% gains. That means 25 out of the past 96 years have experienced gains of 25% or better.
That’s a lot of large gains. There are plenty of investors who are euphoric on the current environment but I know some people who are getting nervous.
Does this spell doom for the stock market?
Not necessarily. Here are the average returns for the S&P 500 in the year after an up year and gains of 20%+, 25%+ and 30% or more:
There isn’t a lot of signal in the noise here. The average return following a 30% gain on the stock market is, well, average.
It’s difficult to predict the future of the stock market based on short-term moves in either direction.
Here are the best years during this epic bull market run:
2009 +26%
2013 +32%
2017 +22%
2019 +31%
2020 +18%
2021 +28%
2023 +26%
2024 +27%
If the performance holds this year, that would be three out of the past four years with gains of 25% or more. It would also be 5 out of the past 6 years with double-digit gains. To be fair, 2022 was a double-digit down year so it hasn’t been all sunshine and rainbows.
This has been an incredible run for U.S. large cap stocks.
I don’t know when it will come to an end but I know it can’t last forever.
However, it is important to understand big up years in the stock market are nothing to be afraid of.
A Wealth of Common Sense is a blog that focuses on wealth management, investments, financial markets and investor psychology. I manage portfolios for institutions and individuals at Ritholtz Wealth Management LLC. More about me here. For disclosure information please see here.
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