Q: Can markets turn positive in the same year they are negative?
A: Yes, markets can turn positive in the same year they are negative.
If you are invested, you have likely seen your investments decline in 2022. It’s unsettling. We recently wrote about volatility and encouraged investors to maintain a well-formed, long-term, diversified portfolio over surrendering to near-term market movement and emotion. But why?
Using the S&P 500 as our guide, over the last 42 years (1980-2021), despite being down 14.3% on average annually, 32 of those 42 years ended in a positive annual return for the investor. In other words, 76% of the time the S&P 500 was negative from where started it started the year, it ended the year with a positive return for those who held that investment. And including the nine years with a negative return and the one year with a flat return, the average return (assuming all dividends reinvested) for the S&P 500 was 12.05% per year, and 8.83% per year when adjusted for inflation (1980-2021).
Market statistics show that investment returns do not favor timing markets or unwinding diversification. Yet if you feel the need to make changes, first consider small tactical moves over sweeping changes or large-scale moves to cash. Discussing your plan with a qualified advisor is most recommended. Your investment professional at Alpine Bank Wealth Management can work with you to invest in a way that serves your best interest, for the long term.
* Some information in this column was sourced from JP Morgan Asset Management and Officialdata.org.
Jesse Bopp, J.D.
Vice President
Alpine Bank Wealth Management
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