Are back-to-back years of stock declines common?

ANTHONY SAGLIMBENE – CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL

February 2023

The S&P 500 Index declined approximately 18% in 2022. This dismal performance may leave investors wondering if 2023 will be more of the same.

It’s a reasonable concern. Though we can’t answer it definitively, we can look at how markets have behaved in the past to infer what could happen in the future.

As the chart below illustrates, it’s rare for the S&P 500 to post consecutive negative calendar year returns. The chart also spotlights the market’s resiliency and strength. Over the past 96 years, the S&P 500 posted a positive return approximately 72% of the time.

Source: Bloomberg, S&P Dow Jones Indices, American Enterprise Investment Services, Inc. Data as of 01/23/2023. Past performance is not a guarantee of future results.

When the S&P 500 has posted back-to-back years of declines, those periods were marked by historically significant macroeconomic events that weighed on market sentiment:

1929-1932: Great Depression
1939-1941: World War II
2000-2002: Bursting of the tech bubble

Making sense of historical data for today’s environment

We believe today’s elevated inflation pressures or even a shallow U.S. recession could be issues market participants eventually look through as they anticipate improving inflation and growth trends over time. That said, this year's stock performance could be constrained by elevated interest rates compared to recent history and slowing growth.

Bottom line

The 69 years of positive stock returns lead us to believe investors and stock prices will eventually return to better days. If you have questions about the impact of the recent market performance on your financial goals, reach out to your Ameriprise financial advisor.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities or strategies mentioned.

The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.

The fund’s investments may not keep pace with inflation, which may result in losses.

Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.

Past performance is not a guarantee of future results.

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

The S&P 500 Index is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value (shares outstanding times share price), and its performance is thought to be representative of the stock market as a whole. The S&P 500 index was created in 1957 although it has been extrapolated backwards to several decades earlier for performance comparison purposes. This index provides a broad snapshot of the overall US equity market. Over 70% of all US equity value is tracked by the S&P 500. Inclusion in the index is determined by Standard & Poor’s and is based upon their market size, liquidity, and sector.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

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