Why the Stock Market’s Winning Streak May End This Year
History Can Provide a Guide
The U.S. stock market — and many others worldwide — is on a roll, having completed its third consecutive bull market gaining year, since the down year of 2018. Can we expect it to continue in 2022? Let’s leave aside any economic or fundamental considerations and instead use history as a guide.
The Long-Term Picture
Let’s take a look at the stock market track record going back almost a century, to 1926. The data are from Morningstar, based on the classic Roger Ibbotson and Rex Sinquefield Journal of Business research, “Stocks, Bonds, Bills, and Inflation” and subsequent annual reports, dating back to 1976. Returns in the chart below are the average of the large cap (i.e., firms with large market capitalization, or stock price multiplied by the number of shares outstanding) and small cap portfolio returns, including both capital gains and dividends.
Over that period, the average annual stock returns were 14.3 percent. 1931 and 1937 were nearly identical for the worst performing years, followed much more recently by 2008, during the financial crisis…
