As bad as 2022 has been for investors, there is a silver lining: back-to-back declines in the S&P 500 are rarer than you may think.

If you go all the way back to 1950, the only times that stocks fell in back-to-back years were during the vicious recession of 1973/1974 and then three years in a row during the tech bubble implosion of the early 2000s. Fortunately, we don’t see similar scenarios within the current environment, so I think the odds could favor a snapback in 2023.

Taking a closer look into the data, we found:

  • The year after, a negative return saw the S&P 500 up 15% on average and higher 80% of the time.
  • A 10% (or greater) loss showed the following year up only 8.5% on average and higher 63.6% of the time.
  • Out of the 20 negative years, only three times did returns get worse the following year (in 1974, 2001, and 2002).
  • However, the following year, significant losses were rewarded as 20% or more declines saw the next year higher all three times and up 27.1% on average (in 1975, 2003, and 2009).
  • Somewhat surprising to me is the year after a positive year, the returns were only 7.1% on average and higher 68.6% of the time. Take note that the average year since 1950 gained 9.5% and was higher 71.2% of the time.

As we head into 2023, we are putting the finishing touches on our Outlook 2023, be on the lookout for it early next year. And if we don’t talk to you until next year, have a great New Year (and go Buckeyes)!


facebook twitter linkedin mail print
Share Post: facebook twitter linkedin mail print
Recent Posts

Carson Research’s Weekly Earnings Update

By: Brett Carson
“The Waiting” Tom Petty’s 1981 classic “The Waiting” was inspired by a Janus Joplin quote; “I love being onstage.  Everything else is just waiting.”  We feel the same about …

Laura Garfield and Sharon Gottula: When Story Meets Finance

By: Jamie Hopkins
In this episode of Framework, Laura Garfield and Sharon Gottula explore the serendipitous story of how they transitioned from making videos for the wine industry to financial services – …

The Economy Had a Strong Close to ’22…Now What?

By: Sonu Varghese
The latest GDP growth numbers for Q4 2022 came in at 2.9% quarter-over-quarter (annualized rate), which was higher than expectations for a 2.6% reading. This is only slightly below …

Understanding Which Financial Advisor Software Your Firm Needs

By: Anthony Duran
The financial advisor software landscape continues to evolve, with new digital tools hitting the market each month. With the right tech stack, you can deliver a better client experience, …
1 2 3 149