The folks at Deutsche Bank Research recently pointed out something interesting about our current stock market — that the S&P 500 has only risen this rapidly four times in the 81 years since the end of World War II.
As of the end of May, it had gained more than 16% over the past two months. For context, consider that the S&P 500 has averaged annual returns close to 10% (ignoring inflation) over many decades, and an impressive 13.7% over the past decade.
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In three of the four previous times, the U.S. economy was coming out of a recession — the periods following the oil crisis in the 1970s, the global financial crisis of 2008, and the more recent Covid-19 disruption.
The other instance is the worrisome one — it occurred just before the stock market crash of 1987. And that was no correction — it was a clear crash, with the Dow Jones Industrial Average plunging nearly 22% in a single day.
We certainly don’t seem to be emerging from a bear market. Check out the S&P 500’s recent returns:
|
Year |
S&P 500 Return |
|---|---|
|
2019 |
31.5% |
|
2020 |
18.4% |
|
2021 |
28.7% |
|
2022 |
(18.11%) |
|
2023 |
26.29% |
|
2024 |
25.02% |
|
2025 |
17.88% |
|
2026 |
11.72% (year to date) |
Source: Slickcharts.com, as of June 2. Returns reflect reinvested dividends.
We more closely mirror 1987, though of course every year or span of years will differ in some ways from others. The S&P 500 had gained about 39% in the year preceding the 1987 crash.
It’s not exactly time to panic or to sell out of stocks, because no one knows what the market will do from day to day or year to year. Looking at the table above, folks might have sold in 2023, expecting a drop, only to miss out on many gains.
But don’t be surprised if the market does pull back in the near future. And consider taking any money you might need in the coming five (or even 10) years out of stocks, just in case.
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