It’s time for “The Greatest Chart Ever”, updated for 2024.
Please make sure the chart above shows on your screen! If not, please ask me to email you a copy.
Long-time TGIF 2 Minutes readers know this particular chart truly is a great chart* with data illustrating reasons to invest in stocks – and stay invested – for the short-, intermediate- and especially long-term. The information focuses on US stocks, namely the S&P 500, and lends to globally diversified stock investing, as well.
“The Greatest Chart Ever” offers needed perspective in times of volatility and uncertainty. Over a period of more than 40 years of intra-year stock market performance, the chart illustrates valid reasons NOT to allow short-term market moves (monthly, quarterly – or even yearly) to lead to poor investment decisions. Why? Please read on.
In the chart above:
- the RED DOTS = how much the market went down at some point DURING each year.
- the DARK GREY BARS = where the market FINISHED AT THE END OF THE YEAR.
For example, the stock market crash of 1987 saw a period of time when the S&P 500 was down 34%. In that particular year, the S&P 500 index finished the year UP 2%.
In the financial crisis of 2007 to 2009, a particularly scary time for stocks, the chart illustrates that in 2008 the S&P 500 was down 49% at one point and finished down 38%. The following year of 2009 saw the S&P 500 down 28% at one point in the year and finishing UP 23%, an upside turnaround of over 55%.
The average intra-year decline has stayed steady over the years at about -14%. In nearly 75% of the time (33 of 44 years) since 1980, returns at year-end are positive.
Already this year in 2024, there has been a period of time when the S&P 500 was down 8% from peak to trough in an intra-year drop! And at press time, the S&P 500 overall is up nearly 25% year-to-date.
This data of over 40 years points out that sticking with an investment plan can be critical to reaching financial goals. Making a rash investment change due to fear caused by an intra-year decline can destroy a well laid out, long-term investment plan.
Another way of expressing the same point: If an investor can stick around for an average annual decline of 14.2%, healthy growth can still have time to take place. Our investing lifetimes are measured in years, not months: think, 10, 20, 30 years and longer.
The decision to stay invested can be challenging in the short-run, but less so when information, data points and trusted advice are added to the equation.
*Source: JPMorgan Guide to the Markets. FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.