Market in 2023 faces difficult challenge to replicate success post banner year

Have you ever wondered what happens after the S&P 500 goes up 20% or more in a year? Surprisingly, such gains are fairly common. Since 1928, the S&P 500 has finished up 20% or more about 36% of the time. On the flip side, declines of 20% are very rare. This data from Dimensional Funds highlights the historical performance of the S&P 500 and sheds light on the potential outcomes following a significant gain.

But what happens after a 20% gain? According to Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, the stock market was up in 22 out of 34 years following a 20% gain, representing a 65% occurrence rate. The average return, average gain in up years, and average loss in down years are also outlined to provide a clearer picture of the post-20% gain landscape.

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Looking ahead to the future, could the S&P 500 see back-to-back gains of 20%? Data from Nicholas Colas at DataTrek Research reveals that this occurrence is relatively rare, happening just nine times since 1928. The likelihood of a second up 20% year is discussed, with factors such as the economy, corporate earnings, interest rates, and investor confidence all playing a role in determining the outcome.

As we reflect on historical data and consider the potential for future growth, it becomes clear that investing in the stock market involves a mix of analysis and a bit of luck. While hitting a second up 20% year is possible, it is not the most likely scenario. Time will tell how the S&P 500 performs in the coming years, but one thing is for sure: the market is always full of surprises.

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