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History paints an optimistic picture for 2020, as strong equity performance years are typically followed by further gains.
Strongest Returns Often Follow Years with 20 Gains Main2019 was a strong year for the markets and investors, led by the S&P 500's impressive gain of over 30%. As we discussed in our accompanying piece, a balanced portfolio of U.S. stocks and bonds posted the strongest calendar year return in over two decades. But coming off an outstanding twelve months, investors may question whether or not that momentum can continue.

The simple answer is "yes." History shows that calendar years characterized by strong equity market returns (defined here as a gain of 20% or more) are much more likely to be followed by another positive year than not. In fact, over 70% of the time that the S&P 500 gained 20% or more in a given year, the index followed up by delivering positive gains again the next year, with an average return of nearly 12%.

The bottom line? Strong equity market momentum in 2019 isn’t guaranteed to continue in 2020, but history indicates that periods of strong performance don’t materially impact subsequent returns. Calendar-year equity returns are positive over 70% of the time, even coming off very strong returns in the preceding year.
Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.