Take a close look at the chart below. For long-time TGIF 2 Minutes readers, it is that time again! For new readers, enjoy “The Greatest Chart Ever”*:
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- the RED DOTS show how much the stock market** declined at some point over the course of each year
- the GREY BARS show the market’s percent return at the end of each year
- years tracked are 1980 through year-to-date 2026
Last year in 2025, the S&P 500 stock market index was down 19% at one point earlier in the year, but finished the year UP 16% (plus dividends). In 10 of the 46 years tracked in the chart, the market finished down. In 35 of the 45 full years shown, the market finished UP, despite an average 14.2% intra-year decline each year.
If market volatility in 2025 underscored anything, it was that early swings in stock prices rarely determine how the year ultimately closes out. Which brings us to the first five weeks of 2026 – if anything, volatile!
Investors — and humans in general — notice market losses far more than market gains. Gains are great, but research says losses are psychologically more painful than the joy of gains. (Gratefulness could be a partial cure for this occurrence?) This year’s volatile start can be put into at least one perspective: look back at overall positive cumulative equity returns in the past 5 to 10 years, and keep a forward-looking outlook that includes longer than 6-month and one-year time frames.
Despite rocky starts, a globally diversified portfolio most often holds strong over multiple-year time periods. The years 2014 and 2016 were notable examples of weak starts with strong finishes. Add systematic or manual portfolio rebalancing, and returns can be enhanced even further.
All of this said, it is essential to stay grounded in a long-term perspective when markets pull back. To reduce anxiety and keep your plan on track, have a conversation with your adviser about what an “intelligent amount of cash” looks like for your situation. As always, please call me with questions or concerns about market volatility and how to better position your portfolio to navigate both market declines and periods of strong gains.
Here’s to the Greatest Chart Ever!
*Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
**References to “market” are to the US stock market as represented by the S&P 500 index.
Consult with a tax professional on ALL tax matters and tax planning. 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.