Let’s look at how long and frequent the years of losses in the US stock market have been in the past.
Let’s start the review with the recent past, the last 22 years.
I’m going to look at the S&P500 in the recent past, but if you really want to look back in time, you have to look at the Dow Jones index, because the S&P500 was only created in 1957.
The recent past
Since 2000, the SPX has had 7 losing years: 2000, 2001, 2002, 2008, 2015, 2018, 2022.
The only time during this period that the SPX had 3 consecutive years of losses was 2000-2002.
The performance was as follows:
- 2000: -9.1%
- 2001: -11.89%
- 2002: -22.10%
- 2008: -38.49%
- 2015: -1%
- 2018: -6.24%
- 2022: -19.44%
Longer time horizon
Let’s see what we can conclude from the 126-year time series of the Dow Jones.
It has closed with a loss for 4 consecutive years:
- 1929 – 1932
There were three instances where it fell for 3 consecutive years:
- 1901 – 1903
- 1939 – 1941
- 2000 – 2002
There were four occasions when it fell for 2 consecutive years:
- 1906 – 1907
- 1916 – 1917
- 1973 – 1974
- 1977 – 1978
In 126 years, the Dow index had 42 years of losses, or 33%.
Of those 42 losing years:
- 2 years of continuous decline occurred 9.52% of the time,
- 3 years of continuous decline 7.14% of the time,
- 4 years of continuous decline 2.38%.
Distribution of negative years over the last 126 years:
- 1901 – 1950: 54.76%
- 1951 – 2000: 33.33%
- 2001 – 2022: 11.9%
From the above, it can be seen that the number of years with losses has decreased significantly since the 2000s, apparently due to the mindless printing of money.
Some more interesting findings about the Dow index:
- There have not been 4 consecutive losing years in 90 years
- The last time there were 3 consecutive losing years was 20 years ago
- The last time there were 2 consecutive losing years was 48 years ago.
- The longest rising streak was between 1990-2000, +427%.
- The best year was 1913, +30.2%.
- The worst year was 1931, -52.7%.
Let’s look at how the composition of the Dow has changed over the past 22 years:
- March 1999: General Motors, Cisco Systems and Travelers Group (Citigroup) replaced Sears Roebuck, Goodyear Tire and Rubber and Union Carbide.
- February 2008: Cisco Systems replaced AT&T.
- September 2008: Kraft Foods replaced AIG.
- March 2009: Cisco Systems replaced General Motors.
- September 2013: Goldman Sachs, Visa and Nike replaced Alcoa, Bank of America and Hewlett-Packard.
- March 2015: Apple replaced AT&T.
- March 2020: Salesforce, Amgen and Honeywell International replaced Exxon Mobil, Pfizer and Raytheon Technologies.
Now that we can see the statistics from the past, we can guess what 2023 will be like ;).
