The Stock Market Performance Cannot Be Predicted
Updated: Aug 30
The stock market performance cannot be predicted. You have likely heard or read “past performance does not guarantee future performance. The performance of the stock market is more random during short periods of time. Aligning your portfolio with the time frame of your objectives may help you resist emotional reactions and actions that may lead to poor long-term investment performance.
Here are some interesting historical S&P 500 data:
1981: -5.76% then 1982: +21.55%
1994: 1.32% then 1995: +37.58%
2002: -22.10% then 2003: +28.68%
2008: -37.00% then 2009: +24.46%
2018: -4.38% then 2019: +31.49%
2022: -19.40% then 2023: ??.??%
In 1981, I was in high school, and I've been a financial professional since 1990. I’ve lived through many market cycles, world events, political disputes, recessions, etc.
If you consider the S&P 500 over the past 50 years has delivered an average annual return near 10.00%, you must stay invested during difficult times in order to benefit from the great years. The stock market doesn’t tell us when it is going to take off on a bull run. There may be pessimism, malaise, and bad headlines at the beginning of a bull market run. However, if you are on the sidelines and miss the upward surges then your performance will not match up with the long-term average performance. Retail investors may get out of the market at low points and invest back in at high points. Selling low and buying high is a dubious investing strategy!
Two other notable years to consider: 1987 had a positive S&P 500 return of 5.25% despite “Black Monday” in October when the index lost over 20% in a single day! When Covid-19 hit us in early 2020, the S&P 500 index dropped nearly 32.00% in five weeks, yet the performance at the end of 2020 was a positive 18.40%! Imagine losing more than 20% of your portfolio value by the end of today. Would you feel good about investing in the stock market tomorrow? Were any of you bullish three years ago in April 2020? That was a scary time for many reasons and losing nearly a third of your stock portfolio value was disconcerting to say the least.
In managing wealth, we make adjustments in individual securities, strategies, while managing the tax impact to your portfolio. We do not predict the future and make wholesale changes in your portfolio when your objectives are long term. We may incorporate several strategies simultaneously such as income strategies for short-, medium-, and long-term income while investing some of your wealth for long-term appreciation.
Our wealth management approach to your wealth begins with your objectives. Customized, thoughtful, and purposeful.