Do downturns lead to down years

S.F. Ehrlich Associates |

Market performance over the past two months (the S&P 500 is down approximately 6.3% from July 31, 2023 through September 30, 2023, including dividends) may have you assuming the market is headed for a down year. (For the record, the S&P 500 is still up about 13% year-to-date through September 30, 2023, including dividends.) While how the market will finish the year is still unknown, downturns don’t always lead to down years. The reality is downturns are often part of the intra-year market cycle.

The chart below demonstrates that market dips, including sizeable drops, routinely occur almost every year. The exception is those calendar years when the markets aren’t in negative territory for at least a portion of the time.

In a recently released graphic by Dimensional Funds1 that chronicles the past 20 years, the chart below reveals intra-year declines ranging from 3% to 49%. As can be seen, “many years with large intra-year declines saw positive returns.” In fact, “In 17 of the last 20 years, US stocks ended up with gains for the year.”

To quote Dimensional: “Tumbles may be scary, but they shouldn’t be surprising. And a short-term slump needn’t mean a full-year fall.”


1 “Do Downturns Lead to down Years?” Dimensional, 1 Sept. 2023,



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