This happened during the first three years of the 2020s:

• Global pandemic and corresponding stock market plunge

• Gradual reopening + massive stimulus and corresponding market surge

• High inflation and corresponding selloff in stocks, bonds, and real estate

And the S&P 500 went up by 19%. Add dividends, and we’re talking about an annualized return of 7.7% per year. If you didn’t know any better, and just looked at the history books a decade or two from now, I wouldn’t blame you for assuming these three years were rather uneventful, if not boring.

Regardless of the path to 19%, how does that compare to previous decades? Have a look at the chart below.

Cumulative returns for the first three years (i.e. 2010 through 2012, or 2000 through 2002, or 1990 through 1992, etc.) are on the horizontal axis. The following three years (i.e. 2013 through 2015, 2003 through 2005, 1993 through 1995, etc.) are on the vertical axis. And the dotted brown line represents the first three years of the 2020s, when the S&P 500 rose by nearly 19%.

I thought it was interesting that only once, in the 1970, did the second three-year period have a negative return. Aside from that period, the worst U.S. stock investors fared was 41%, in the mid-1990s.

Does this mean stock investors should expect a boom over the next few years? If only it were that simple.

Think back to the beginning of the decade. I tell you a paralyzing pandemic and inflation running at 40-year highs would influence the first three years of the decade. You may understandably think twice about investing.

Even if we were able to accurately predict inflation, outcomes from Russia’s invasion of Ukraine, or Federal Reserve policy decisions, we still may not be able to use that information to correctly predict the direction of asset prices.

We would encourage investors to avoid letting short-term events dictate long-term investment strategy. Having a plan in advance of events like this can help avoid mental mistakes and improve the chances of achieving the goals that are uniquely important to you.

Interested? Please feel free to reach out to me at eric@divviwealth.com or set up time with the Divvi team to see how we can help.

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