A Wealth of Common Sense: The Roaring 2020s

The decade is nearing its halfway point. And what a wild ride it’s been. First, 2020 kicked off with the pandemic, leading to one of the fastest selloffs in stock market history. Following that rally, stocks are up over 180%.

Of course, it wasn’t a straight line. 2022’s bear market resulted in stocks dropping 18% over the year, and nearly 25% from their peak. Typically, bear markets are spaced a bit further apart than two years.

Despite those big drops, stocks have now seen two years of over 20% gains. Typically, if earnings hold up, markets can continue higher, if at a slower pace. With the market up 70% since its 2022 low, a few years of flat performance would result in strong annualized returns of 14.5%.

Meanwhile, investors who stuck with a dollar cost average have seen returns closer to 17% annualized so far this decade.

In other words, even with the big drops, stocks have come back stronger than ever.

Given that overall performance, investors who stayed the course during market selloffs ended up coming out ahead. That’s a good thought to bear in mind in the next stock market selloff.

It’s likely that the second half of the 2020s won’t play out like the first half. Drawdowns are unlikely to be as bad as the pandemic selloff. And bouncebacks may not be as strong. But investors should continue to stay the course in fearful markets.

To read the full analysis, click here.