Do Downturns Lead to Down Years?

Stock market slides over a few days or months may lead investors to anticipate a down year. But the US stock market had positive returns, despite some notable dips in many of those years. 

Intrayear declines for the index ranged from 3% in 2017 to 49% in 2008. Many years with large intrayear declines saw positive annual returns. In 17 of the last 20 years, US stocks ended up with gains for the year (see Exhibit 1).

Volatility is a normal part of investing. Tumbles may be scary, but they shouldn’t be surprising. A long-term focus can help investors keep perspective.

EXHIBIT 1

Down but Not Out

Russell 3000 Index returns, with steepest declines within each year, January 2003–December 2022

DISCLOSURES

The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. “Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. Please click here to read the full text of the Dimensional Fund Advisor Disclaimer.

About the Author Doug Finley

Douglas Finley, MS, CFP, AEP, CDFA founded Finley Wealth Advisors in February of 2006, as a Fiduciary Fee-Only Registered Investment Advisor, with the goal of creating a firm that eliminated the conflicts of interest inherent in the financial planner – advisor/client relationship. The firm specializes in wealth management for the middle-class millionaire.

follow me on:
>

Stay Informed With Our Latest Articles To Increase Your Financial Awareness