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Flat Years Don’t Foretell Next Years

How do think the stock market will perform this year?

While 2015 was an underwhelming year for the S&P 500 Index, it is interesting to look at what the index did following prior underwhelming years (defined as returns between -5% and 5%). Investors may think that an underwhelming year foretells more meddling returns in the following year. But check out this chart…Since 1926, there have been eleven periods (including last year) where the index fell in this range.Interestingly, the following year has been positive in 9 out of 10 of the prior periods.

FlatReturnsDontForetell
That is not to say that investors should expect above average returns for 2016, but historically, underwhelming return years are not predictive of the following year’s returns.

Chart, Investing

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