I like numbers so I don’t shy away from the fact that I like statistical analysis and data. As a result, I’ve collected some data on the stock markets that may be interesting to some people.
Before I show you the stock market historical data, I want to put forth my disclaimer: This data has been accumulated over many years and I cannot guarantee the accuracy of the data. I think the data is still interesting so I hope you can find some interest in it.
Related article: The Five Realities of the Stock Market
Bond Returns vs. Stocks 1988 – 2018
Interesting observations on a calendar year basis (from 1938 to 2018):
Like most distribution charts, most of the calendar year returns fall between -10% and +30%.
Generally speaking, markets spend more time making money and less time losing money
- Markets have been positive 73.7% of the time
- Markets have been negative 26.3% of the time
Investing is less about perfection and more about probabilities.
- Investors who buy and hold have a historical probability of making money 73.7% of the time. This is good data for passive investors.
- Investors who are trying to out guess the market need to win more than 73.7% of the time to do better than the markets. That’s pretty challenging.
Three years of consecutive growth
- Markets go up and down.
- The longer any bull market goes, the greater the likelihood of a market correction or even a bear market.
- This is not a prediction by any means but just a reminder that volatility is a reality with the markets.
Markets tend to rebound after bad years
- The TSX has experienced back-to-back negative years only twice over the past 75 years.
- The TSX was negative 20 out of 79 calendar years.
- 18 out of those 20 years, the market bounced back with positive return in the following calendar year
- The average return of years that follow a negative year was 14.6%
- Internationally the data is very similar but there has been a little more volatility and also greater downside risk.
The bottom line is that markets go up and down. As much as we hope markets will stay positive, the risk of a correction is always there. You can't accurately predict when it's going to happen but when it happens, there is also a very high chance of rebounding the calendar year following a negative year.
That’s just a few of my observations. Do you see any interesting observations I may have missed?