The Down Years

In the nine years from 2000 to 2008 the S&P 500 was down almost as many years as it was up:

That’s three down years in a row from 2000-2002 and then the big down year in 2008.

Since 2009 it’s been much smoother sailing.

The S&P has finished out the calendar year down just two times out of the past 17 years:

In 2018 the S&P 500 finished the year down a little more than 4%. Then the 2022 bear market saw stocks end the year down almost 20%.

And that’s it as far as annual losses go.

Of course, there have been corrections along the way.

There were five double-digit corrections in the 2010s. Two of them were a stone’s throw from 20% losses. The Covid bear market in 2020 saw losses in excess of 30% but the market finished the year with double-digit gains. The same thing happened last year following the Liberation Day kerfuffle. There was also a minor correction in 2023.

But most of those years still finished up.

The Russell 2000 and Nasdaq 100 haven’t had many down years in this cycle either.

Here are the Russell 2000 losses after 2008:

• 2011 -4.2%
• 2015 -4.1%
• 2018 -11.0%
• 2022-20.4%

The Nasdaq 100 has had just one down year since 2008:

• 2022 -32.6%¹

So losses have been few and far between for investors during this 17+ year-long bull market in U.S. stocks.

From 2000-2008 the Russell 2000 fared much better than the S&P 500 when it came to the magnitude of losses but still had plenty of down years:

• 2000 -3.0%
• 2002 -20.5%
• 2007 -1.6%
• 2008 -33.8%

Nasdaq 100 losses from 2000-2008 make almost everything else look faint by comparison:

• 2000 -36.1%
• 2001 -33.3%
• 2002 -37.4%
• 2008 -41.7%

Stock market ups and downs tend to be lumpy. Down years can cluster together or you just get one big flush that sees a severely negative year.

Could we see a down year in 2026? It’s certainly possible.

Through the close on Thursday, here are the year-to-date returns for these three indices:

• S&P 500 -3.5%
• Russell 2000 +2.3%
• Nasdaq 100 -4.6%

Three thoughts about down markets:

• They don’t happen very often during bull markets.
• Gains and losses tend to cluster.
• Don’t be surprised if we have a down year in 2026. We haven’t had many of those.

But also don’t be surprised if this is yet another correction that leads to a decent year in stocks.

This is the dichotomy of investing in risk assets.

Michael and I talked about down years in the stock market and much more on this week’s Animal Spirits video:

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Further Reading:
How the Stock Market Performs After a Correction

Now here’s what I’ve been reading lately:

• Silver linings in the smoke (Illiquid Assets)
• An ode to my 2009 Honda Accord (Belle Curve)
• Intentional vs. unintentional giving (Whitecoat Investor)
• The fake Cartier and fake Rockefeller (NY Mag)
• Friction rules everything around us (Abnormal Returns)
• In search of Banksy (Reuters)

Books:

• How the World Really Works by Vaclav Smil
• Project Hail Mary by Andy Weir

¹2018 was slightly negative for the ETF but the total return for the index was +0.04%.