The Curious Year of 2017
February marked the ending of one of the greatest stock market streaks in the investing world since the early 50s (when the modern design of the S&P 500 was implemented). Streaks are a funny thing. They don’t tell the whole story, but they are interesting to follow and do point out some interesting things to look at from a “bird’s-eye-view.”
Last year, 2017, was the first calendar year on record where the S&P 500 index had a positive total return each month of the year. In fact, since November of 2016 (election timing of President Donald Trump), the S&P 500 Total Return has been positive each month, ending with February 2018.
This past February marks the first time in over a year where the S&P 500 ended with a negative total return. The streak stops at 15 straight months of positive returns. In the past nearly 70 years, there have been 3 occurrences when 11 of the 12 months were positive (1958, 1995 and 2006).
For reference, the average number of positive months per year in the last 68 years is 7.6 and the median is 8.
Now, one thing that this chart does not describe are the annual total returns for the index each year. Whether the market was up 0.1% or 10%, it still counts as a positive right?! However, that’s obviously an important distinguishing factor. Let’s take the example of 1999, when there were only 7 positive months. The total return for the S&P 500 was 21.04%, according to LPL Research. On the flip side, look at 2011, when there were 6 positive months and the S&P 500 total return was 2.11%, but October of 2011 shows a total return of 10.9%. This is one reason why we discourage market timing. Can you imagine if you missed that best month of the year…? That’s another discussion that we will continue to have.
All in all, 2017 was a good year for stocks, not many dispute that. But what's interesting is that it was also a very consistent year, not just an overall above-average return. Volatility is an expected outcome of prudent investors, and something that should be consistently discussed as we move forward on the investing path to our individual goals.