A Wealth of Common Sense: How Often is the Market Down in Consecutive Years?
The stock market is on track for a double-digit decline this year. That’s the 12th time such a move has occurred in 95 years, or about 13 percent of the time. In other words, while unpleasant, this year’s selloff hasn’t been too abnormal.
In the meantime, the stock market is up about 55 percent of the time in the next calendar year following a loss.
That may sound a little better than a coin toss, but it also reflects that markets often take time to recover from a big drop.
However, looking at the long-term data, it’s clear that just 9 percent of the time, markets are down for two consecutive years in a row. That’s a much lower likelihood.
That data includes 4 down years in a row from 1929-1932. The last such performance was in the 2000-2002 bear market. And the market went from 1975 to 2000 without a single double-digit down year.
So investors worried about another down year should recognize the exceptional circumstances that tend to occur around such a drop.
Even better, there’s never been a period of two consecutive down years for both stocks and bonds at the same time. With bonds down heavily in 2022, it’s clear that either bonds or stocks are statistically likely to rally in the coming year.
