One Year Later – December 18, 2019
A year ago, stocks were in the middle of a serious correction, with the S&P 500 Index2 losing nearly 20% over three months (St. Louis Federal Reserve).
- Fears of a Fed policy mistake that would lead to a recession were overblown but rampant.
Last year’s selloff was one of 38 market corrections of at least 10% since 1980 (LPL Research). When a recession is avoided, returns one and two years later are almost always higher.
| S&P 500 Index Pullback | S&P 500 return 1 year after low | S&P 500 return 2 years after low | |
| Average | -15.5% | 15.7% | 28.5% |
| Median | -14.2% | 22.4% | 37.7% |
| Percent Higher | — | 73.0% | 77.8% |
Source: LPL Research Past performance no guarantee of future performance
When we did see declines after one or two years, they were centered around the 2001 and 2007-09 recessions.
As of December 16, the S&P 500 is up 25.4% vs a year ago (St. Louis Fed).
Investor’s corner
Bull markets are not without pullbacks but have historically centered around economic expansions, which support corporate profits. Bear markets (20% or greater decline) have historically centered around profit-killing recessions.
Longer term, economic performance has a heavy influence on stock market performance. As we’re set to enter 2020, recession worries earlier in the year have subsided. Shorter term, volatility can never be ruled out.
Investors with a long-term time horizon that adhere to a holistic financial plan, which takes various cycles into account, are on the best path to wealth creation and their financial goals. If you have a financial plan you are satisfied with, you are on the less-traveled road. We applaud you.
Created 2019-12-18 15:38:00
