2015: Up, down, up = flat returns

When looking simply through the lens of a calendar-year return, U.S. equities were essentially flat in 2015 – the S&P500® Index had a return of 1.4%. However, this masks the circuitous route equities took throughout the year before their plateau. Basically they waited until the last few days of the year to decide between a positive or negative annual return. Note that many other major asset classes had equally flat or worse returns. But such lackluster performance can cause investors to question the utility of being – and staying – invested. When uncertainty threatens to derail your conversations with clients, consider using the following exhibit and statistics to help  restore clients’ confidence so you can focus on what matters most—a long-term, disciplined investment approach.
  • Since 1926, stocks have more often finished the calendar year in positive rather than in negative territory (73% of the time)
  • It’s extremely challenging to predict whether a calendar-year return will be positive or negative
  • The last time the U.S. equity market posted a negative calendar-year return was in 2008. So 2015 marks the 7th consecutive year of positive U.S. equity calendar-year returns.
Paid to own stocks chart Represented by the S&P 500® Index from 1926-2015. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly.

A closer look at 2015 equity returns

As the exhibit below illustrates, China’s decision to devalue their currency (the yuan) in August was a surprise to the markets and stands out in 2015. Investors will likely recall that it prompted a 12% pullback in U.S. equities (represented by the S&P 500 Index). But, similar to previous pullbacks, the market recovered, bouncing back 10.3% by year-end. Put it all together and the S&P 500 Index was up 1.38% for the year. U.S. Equities Up 2015 Chart Represented by the S&P 500® Index. From a sector perspective (based on Russell 3000® Index sectors), Energy was the biggest negative outlier, down -23% for the year. This is no surprise given that oil prices dropped by nearly 1/3 over the course of the year. Luckily, its impact was somewhat limited to the broad market level. This is especially true given that Energy is the smallest sector by market cap, representing only 6% of the U.S. stock market. On the other end of the sector returns spectrum, Consumer Staples was up 8% for the year. Some of the leading industries within Consumer Staples were Brewers / Distillers (up 27%) and Tobacco (up 22%). It seems that 2015 was a year driven by smokers and drinkers. Think about that!

The bottom line

Investors are often tempted to try and time the stock market. The examples above can help remind clients that since 1926, U.S. stocks have historically finished the calendar year in positive territory more often than not. Share these examples with investors to help them understand that timing market pullbacks and corresponding bounce backs can be challenging, but helping them stay invested may prove more successful in achieving long-term outcomes.