Sudden market downturns can be unsettling. But historically, US equity returns following sharp downturns have, on average, been positive.
- A broad market index tracking data since 1926 in
the US shows that stocks have tended to deliver
positive returns over one-year, three-year, 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 compounded returns all top 50%. - Viewed in annualized terms across the longest, five-year
period, returns after 10%, 20%, and 30% declines have
been close to the historical annualized average over the
entire period of 9.6%.
Sticking with your plan helps put you in the best position to capture the recovery.