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What the Stock Market Would Tell You, If It Could Talk

Mark J. Smith, CFP®, CPA/PFS, CIMA®
February 5, 2019

Feeling anxious? You’re not alone. Because 2018 was one of those years when the S&P 500 lost money and that tends to unnerve people. Unknowns like the China trade tariffs, North Korea, Brexit, the government shutdown, and talk of future increases in inflation and interest rates all contributed to a declining stock market, even while corporate profits continued to rise.


While it may be tempting to take your money and run, we encourage you to take a step back and settle in for a little history lesson that may change your perspective.

The Stock Market Has a Story to Tell

No one can predict the future – not us, not the talking heads on the nightly news, not Madame Esmerelda on the psychic hotline.


What we can – and did – do is to take a statistical approach and conduct in-depth research on the historic trends of the stock market. We’d like to share that information, and our interpretation of it, to shine a little light on the past in hopes of helping you look at the future with more objectivity.


We analyzed the year-by-year total return (which includes price change plus dividends) of the S&P 500 from 1928 through the end of 2018.


Here are the most important statistics and some supporting information to help put things in historical perspective.

  • Over the course of 91 years, the stock market has been profitable for 66 of those years (73% of the time).
  • Of the 27% of the time the stock market lost money, there were 13 single-year loss periods and only four periods where losses continued beyond the calendar year.
  • Earnings per share* grew strong over 91 years, from $1.38 in 1928 to an estimated $175 in 2018.

There are bear markets, characterized by a 20% decline, and then there are great bear markets, which have a 30%, or worse, decline (intra-year). In the 91 years, there have been five great bear markets:

  1. 1929 – 1932: The Great Depression. The only period the stock market saw four years of consecutive losses.
  2. 1939 – 1941: Years marked by the calamity and fear going into WWII.
  3. 1973 and 1974: These two years saw the first oil shock (oil prices jumped from $2 to $12 a barrel), the U.S. lost the Vietnam War, and President Nixon was impeached.
  4. 2000 – 2002: The dot-com bubble burst, the 9-11 terrorist attacks occurred, and the ensuing recession developed.
  5. 2008: The real estate bubble collapsed, the S&P fell 37%, and the Great Recession came to pass.

Every Reason to be Positive

Our analysis gives us every indication that we should feel positive for the coming year. Remember, 76% of loss years were followed by profitable years. Statistically speaking, the markets have always made more money than they’ve lost. If you do have a loss one year, the probability is very high that the next year will be profitable. The even better news is that the average gain following a single loss period is a handsome 26.3%.


The data also tells us that a more-than-one-year loss has always been linked to some great bear market event, as noted above. Quite frankly, we do not see a great bear market as an imminent concern. Here’s why:

  • Record corporate profits and record stock buy-backs. Our nation’s most experienced businesspeople recognize that stock prices are very fair, if not inexpensive, and are using corporate profits to buy back their stocks.
  • A fully-employed economy with unemployment below 4%.
  • Low relative interest rates. Ten-year treasury rates are hovering at or below 3%.
  • Subdued inflation. Trailing inflation is still hovering at or around 2%.

While there are no guarantees as we move forward, studying the history of the market leads us to believe that the outlook for 2019 is an extremely positive one.


As always, we’re here to answer any questions you might have. Don’t hesitate to contact us to discuss your future plans.

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Also watch our recently recorded webinar:

Understanding Market Volatility

(40 minutes)

*Sources: multpl.com and JP Morgan Market Insights through 11/30/2018.  Earnings per share is inflation adjusted, constant November 2018 dollars. The S&P 500 is an unmanaged index of 500 widely held stocks.  Past performance is no guarantee of future results.  One cannot invest in an index. Past performance is no guarantee of future results.

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