Sudden market downturns can be unsettling. But historically, US equity returns following sharp downturns have, on average, been positive. For example, as I write this blog entry, the US index used in the research below is up 21% year-to-date after having been down 20% in 2022.
- A broad market index shows that US stocks have tended to deliver positive returns over one-, three-, 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 cumulative returns all top 50%.
- Viewed in annualised terms across five years, returns after these declines have been close to the historical average over the entire period of 9.5%.
Sticking with your plan helps put you in the best position to capture the recovery.
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This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The value of investments and any income from them can fall as well as rise. You may not get back the full amount invested.
Past performance is used as a guide only; it is no guarantee of future performance.Past performance is not a reliable indicator of future performance.
The value of investments may go down as well as up and you may get back less than you invest.