America is now 250 years old.
There has been a lot of history talk in recent weeks as we approach the sesquicentennial.1
So I couldn’t help but do a little US stock market history.
Bill Simmons had Taylor Sheridan on his podcast recently. When Simmons asked Sheridan about his filmmaking style, he said: “Never let a character tell me something that the camera should show me.”
I have similar feelings about stock market data. Let’s go through some visuals.
These are the annual calendar year returns from 1928 through the end of 2025:
The average annual return during this period was 10% per year.
However, the average experience in any given year was nowhere near 10% each year.
If you show only the up years and subtract the down years, the returns look like this:
Now, if you remove the up years and show only the down years it will look like this:
The most obvious difference between the two charts is the fact that there are much more up years than down years. If the gains in 2026 continue, that would mean 73 of the last 99 years would finish in positive territory.
That’s a pretty good win rate.
It’s also true that there are far more big boom years than big bust years. What do you see as big when it comes to wins and losses?
My unscientific definition would be 25% or better (worse).
Years with gains of 25% or more since 1928:
Big years happen quite often.
Here are the years in which losses exceeded 25 percent:
This is a very small number.
There have been 26 calendar years that resulted in gains of 25% or more; this includes 18 years that resulted in returns of 30% or higher.
The stock market, on the other hand, produced only 5 major downturn years, 3 of which occurred in the 1930s. It has only happened twice since the end of World War II.
Of course, that’s what makes these years of great loss so difficult to stomach. Dealing with losses when wins occur more often is no fun.
It is fundamentally impossible to predict stock market returns. There is no rhyme or reason to the returns from one year to the next.
But as a general rule:
Sometimes the stock market goes down, but most of the time it goes up.
Further Reading:
Risk and Reward
1I can’t believe that’s the word we decided on for this.
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