Last year was the first negative year (calendar year at least) in the US Stock market since 2008.  Are we in for a rebound or are we in for continued struggles? Most people are wondering what happens next.  We’ll look at some historical data to see if it offers any guidance about what we should expect in 2019.

 

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Since 1950, the stock market has decreased 14 times.  On average, one out of every four years results in a negative result.

What Happens Next?

As you can see from the image above, the S&P 500 has generated back-to-back negative years just 3 times since 1950.  The first happened in 1973 and 1974.  And more recently, it happened in 2001, 2002, and 2003.  If you go back to the mid 1920’s, it happened in 1929-1932 and then from 1939-1941.  In other words, negative returns in consecutive years are not common.

What happens next: 1 year later—

In the year following the last 14 calendar year declines since 1950:

The market went up 11 times.  The average gain was 17%

What happen snext: 3 years later—

Three years after the last 14 declines, the market was positive 13 times, with an average annual return of 13.6%

What happens next: 5 years later—

Five years after the last 14 declines, the market was positive 13 times, with an average annual return of 11.3%

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