What if we told you that the S&P 500 has finished up 10% or more 55 times since 1928. Fifty-five times in 95 years, up by more than 10%. It has had really strong results in more than half of the years.

Now, what if we told you that in 23 of those 55 years, there has also been a temporary decline of 10% or more. In other words, in over 40% of the years in which the market finished up 10% or more, you also had to endure a 10% pullback. This is also usually the time that the media begins saying that this time is different and the world is coming to an end.

This is why it is so important, even in the years when the market is up substantially, to view any larger temporary decline not as a reason to sell but as an opportunity.

This great chart from JP Morgan shows the performance of the S&P 500 each year from 1980 until August 14, 2023.

The return of the S&P 500 is in black. Coupled with this data are the temporary declines that happened at some point during each of these years. The average decline during the years that the market finished positive was about 11%. Said another way, to get that positive market return in those years, you needed to hold on during that significant, but temporary, 11% average decline in stocks.

It is also worth noting that the S&P 500 finished positive in 32 of the past 43 years despite a temporary decline at some point every single year.

Even more encouraging is this chart from A Wealth of Common Sense.

Here we can also see the temporary drawdown that happened in the years where the S&P 500 finished up 20% or more. There have been quite a few years where the S&P 500 has been down more than 10% and still gone on to finish the year up more than 20%! In fact, over the past 95 years, the market has been up 20%+ for the year more often than it has been down by any amount by a count of 34 to 26. Pretty good odds!

These charts show why it has been, and always will be, so important to hold your investments during these inevitable temporary declines. To capture the full upside of the great years, you must be willing to stick to your investment strategy during the volatile times.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.