Great Years Still Include Scary Declines
This week, we hosted a seminar at our office titled “What 2025 Taught Us – And What it Means for the Year Ahead.” A copy of the slides can be downloaded here.
One theme of the presentation was that scary double-digit stock market declines occur nearly every year, and 2026 will likely be no different.
For example, last year the S&P 500 finished up more than 16% after gaining 23% in 2024. And yet, by Apr. 8 of last year, the S&P 500 experienced a peak-to-trough decline of roughly 19%, largely driven by tariff announcements.
The declines in 2025 inspired me to write the note, “Stock Market Declines Are Normal,” which was largely just a refresh of an article with the same title I wrote in 2024 after the S&P 500 had fallen 4.5% over the previous five days and Japan had its worst market decline since 1987.
Both were very scary times in otherwise great years. But these things will happen.
In any given year, the average peak-to-trough decline for the S&P 500 is 14%. Yet, despite these regular pullbacks, the market has been positive 34 of the last 45 years, with an average annualized return (from 1980 - 2025) of 9.405%, or 12.117% with dividends reinvested.
While I have no idea what will cause the stock market to decline in 2026, I have no doubt it will happen again. And when it does happen, I fully expect it will feel scary, and I fully expect I’ll get a few calls from people who want to sell.
I always do.
Humans aren’t designed to be good investors. Our only hope is to tune out the noise, execute our plans, and remember that this too shall pass.
Seminar Recap:
Here is a link to the seminar slides, and below is a picture from Wednesday’s event. Thanks to everyone who came out.
Personal note:
We used the long weekend to visit family in California, and no one was injured during the five-person bicycle ride.
Thanks !