Since 1970, In Years When the SP 500 Returned 20%, What (Usually) Happened Next ?

Morningstar’s Stock, Bond, Bills & Inflation has some interesting long-term capital market information, much of it from Morningstar’s acquisition of Ibbotson & Associates in 2005.

Looking at the annual returns of the SP 500 since 1970, and including the period from 1995 to 1999, there were just 16 calendar years of the 48 years in the data set, where the SP 500 returned greater than 20% for the calendar year,

In only 3 instances was a +20% or greater year for the SP 500 followed by another year of +20%:

  • 1.) 1975 – 1976, which followed the 50% bear market following Watergate, President Nixon’s resignation and then pardon, and the fall of Saigon, etc. etc.
  • 2.) 1982 – 1983, which was the very start of the record bull market of the 1980’s and 1990’s

and of course,

  • 3.) 1995 – 1999, which saw every year above 20% returns, but just two years less than 25%. What an extraordinary period.

In 4 instances was a negative year seen following a +20% year:

  • 1977’s -7% return after the 1976 banner year of +24%
  • 1981’s -4.92% return after the +32.50% in 1980
  • 1990’s -3% return after 1989’s +32%, but that was helped by Saddam Hussein rolling into Kuwait and crude oil spiking to $40.
  • 2000’s -9% after the 1999 peak of +21%, as the Tech sector slowly started to come apart. (Intel preannounced in Sept ’00 – that was the start of two years of intense pain.)

The above 48 years period contains 10 Presidents, countless Congressional elections, various majorities of Congress switching sides, one very Cold War, several hot wars, much mainstream media angst, much mainstream and financial pessimism, many different Federal Reserve chairs, many different tax, fiscal and monetary policies and – well – you get the point.

Here was this blog’s 2017 forecast for the SP 500 in December, 2016. The peals of laughter (then, I’m sure) probably should have knocked me over in Chicago.

The forecast itself was pretty much a function of the fact that the SP 500 hadn’t seen a 20% year since 2013, and we had a new pro-business Congress and President.

That’s about as complex as it gets.

The 2018 forecast will be up this weekend, but it’s hardly nail-biter.

Thanks for reading…



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