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Jan 27

What comes after a big year for stocks

  • January 27, 2022
  • CWM Investment Team
  • Industry Trends, Investments, Richard Barrett

The questions I am getting from clients now are focused almost entirely on three specific things:  (1) the equity market is at an all-time high and coming off a big year for returns…..danger territory?; (2) inflation running hot and inflationary pressures everywhere, and (3) is the Fed about to abruptly end the economic recovery? All excellent questions – lets tackle #1 today.

Over the past 40 years, the US equity market has delivered +20% oversized returns 11x. In 9x out of these 11x the following year the market had positive returns. The average of the following years return was +13% – please see the nice chart below. Negative returning years were 1981 and 1990.  In 1981 (following a solid 1980), the Fed’s battle versus extremely high interest rates had just commenced.  In 1990 (following a solid 1989), the yield curve had inverted and a regional recession (NE, TX, AZ real estate) was underway. We don’t cherry pick data, though. But 9 out of 11 is a pretty good batting average following big up years for the market.  Data is data.

It’s also interesting to note that early in the following year, the market retreated each time. Sometimes small declines, sometimes large declines…..but fell 11 out of 11 times. Expect volatility to surface in 2022. Last week was not the first time we will hit speed bumps this year in the equity market. Expect volatility, embrace volatility, do not fear the volatility when it surfaces.

Big YearPrice % GainNext Year% GainEarly Year DropEarly Year Date
198025.8-9.7-6.72/19/81
198526.314.6-3.71/22/86
198927.3-6.6-8.61/30/90
199126.34.5-5.44/8/92
199534.120.3-2.81/10/96
199731.026.7-5.11/9/98
199826.719.5-1.61/14/99
200326.49.0-2.55/17/04
201329.611.4-5.82/3/14
201928.916.3-30.83/23/20
202126.9???
Median26.913.0-5.2
Source:  Bloomberg/Canaccord as of January 11, 2022. Past performance does not predict future results

Richard Barrett
Chief Investment Officer


Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.

This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.

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    Congress Wealth Advisor Solutions (CWAS) is a division of Congress Wealth Management, LLC (CWM), which is a registered investment advisor with the U.S. Securities and Exchange Commission. For additional information, please visit the Investment Adviser Public Disclosure website by searching with CWM's CRD #310873. Investment Advisory services are offered and rendered through CWM. CWM acquired Pinnacle Advisory Group, Inc. (Pinnacle) on April 30, 2021.