Stock Gains After Big Declines

History Shows That Stock Gains Can Add Up After Big Declines

Chart - Stock Gains After Big Declines

Sudden market downturns can be unsettling. But historically, US equity returns following sharp downturns have, on average, been positive.

  • A broad market index tracking data since 1926 in the US shows that stocks have tended to deliver
    positive returns over one-year, three-year, and five-year periods following steep declines.
  • Cumulative returns show this to striking effect. Five years after market declines of 10%, 20%, and 30%, the compounded returns all top 50%.
  • Viewed in annualized terms across the longest, five-year period, returns after 10%, 20%, and 30% declines have been close to the historical annualized average over the entire period of 9.6%. (1)

Sticking with your plan helps put you in the best position to capture the recovery.

Shore Point Advisors

(1) The average annualized returns for the five-year period after 10% declines were 9.33%; after 20% declines, 9.66%; and after 30% declines, 7.18%.

This post was prepared and first distributed by Dimensional Fund Advisors.

Shore Point Advisors is registered as an investment adviser with the State of New Jersey. Shore Point Advisors only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Past performance is not indicative of future returns. All investment strategies have the potential for profit or loss. There are no assurances that an investor’s portfolio will match or outperform any particular benchmark. Content was prepared by a third-party provider. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. All expressions of opinion reflect the judgment of the authors on the date of publication and are subject to change.


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