Latest Market Volatility
We have often said in our meetings that our goal is to achieve more up months than down months in a year, knowing that we’ll always have market volatility. It is extremely rare to have 12 up months in a row – more on that below. Those who stay the course quite often experience improved long-term results. Just like last year, the markets have gone down as of late. We have a plan and will rebalance as needed between stocks, bonds, and cash during this volatility.
Below is some interesting market history about calendar year market returns.
Why is it negative so often during the 12 months of each year?
Markets require “breathers.” Even in a great year like 2023 or 2024, it is normal to see pullbacks of 5% to 10% at some point during the year. These are often called “corrections,” and they happen almost annually, even when the year ends with a massive total gain. No matter the year, there is always some noise in the world that causes volatility.
In the modern era of the stock market, having a “perfect” year where the index is positive in every single calendar month is extremely rare, but it has happened once.
The “Perfect” Year: 2017
In 2017, the S&P 500 accomplished a historic feat by posting a positive total return in all 12 months of the year. While the price index itself was technically down by a microscopic amount in March 2017 (about -0.04), once you factor in dividends (total return), every single month finished in the green. It remains the only year in the history of the S&P 500 (dating back to its expansion to 500 stocks in 1957) to achieve this.
Other “Near-Perfect” Years Before 2017
The market came close several times. In these years, the index was positive in 11 out of 12 months:
- 1958: Only one down month.
- 1995: Only one down month.
- 2021: While not a “perfect” year, it was exceptionally strong, with the S&P 500 reaching 70 new all-time highs throughout the year, though it did have a few minor monthly dips.
Why Is It So Rare?
The stock market is naturally volatile. Even in “bull market” years where the annual return is 20% or 30%, it is standard for there to be at least one or two months of “profit-taking” or reacting to economic data.
Average Monthly Odds
Historically, the S&P 500 is positive about 59% to 60% of all months.
Key Takeaways from the Data
- The Daily “Coin Flip”: On any given Tuesday, the market is almost as likely to be down as it is to be up (53% vs 47%). This is why “day trading” is so difficult; you are fighting against nearly even odds.
- The 1-in-4 Rule: Historically, you can expect the stock market to have a “bad year” (negative return) roughly once every four years.
- The Power of Time: There has never been a 20-year period where an investor lost money (including the Great Depression and the 2008 Financial Crisis).
- Average Gains vs. Losses: Interestingly, the markets’ “up” days aren’t necessarily way more explosive than the “down” days. The average daily gain is roughly +0.82%, while the average daily loss is about -0.87%. The market grows simply because there are more up days than down days over time.
How many up vs. down months will 2026 bring? We do not know. But what we do know is that diversified portfolios help weather these market storms, and our time spent together on your financial plan will continue to keep your retirement secure.