Pullbacks “R” Us The long-term trend of the stock market is up. Period. To reinforce that statement, take a look at the closing levels of the Dow Jones Industrial Average over the last 100 years: The average annual rate of return over this period was 10.5%. That was before inflation, which averaged about 3.1% a year. The real return, net of inflation, was 7.4% a year. The advance has not been straight up. Quite the contrary. A study by JPMorgan (see below) found that although the market advanced in three out of four years, there was an average intra-year drop of 14.3% during the period measured (1980-2021). At current Dow levels, that would be a reduction of 4,500 points. Nearly half of the pullbacks were less than 10%; five were more than 30%. In all cases, stocks recovered and continued to climb. Over extended periods of time, equities have delivered the highest average annual rate of return of all asset classes. Along the way, however, there have been substan
Investment and economic observations by N. Russell Wayne, CFP, MBA. Mr. Wayne is the president of Sound Asset Management, inc. and former Managing Editor of The Value Line Investment Survey.