Life moves fast.
So do stocks.
So far this year, the stock market experienced one of its fastest snapback rallies ever.1
The drama of liberation day and the tariff selloff is in the rearview mirror. For now, at least.
Remember, though, there is always something to be uncertain about. Extremes are normal for equities.
You can blame Trump now, or current geopolitics, or present economic data, but presidents and companies and Fed meetings come and go. Volatility, on the other hand, will last what feels like forever.
Therefore, the default setting for long-term investors should be to expect drama in the stock market.
Meb Faber of Cambria Investment Management writes:
Most investors understand that stocks return about 10% per year over time.
However, many investors may not appreciate the volatile path that stocks often take to achieve this 10% return. It’s not a steady 10%, 10%, 10%.
Over the past 125 years, the average up year in markets was 21%!
The average down year is -14%.
There are about three times as many up years as down years. In fact, there are more 25% or more up years than down years.
But the down years still happen, and when they do, they’re scary…
Staying the course can be tough on the path to 10%.2
What’s the lesson here? Though the stock market can be dramatic, investors should not be.
In order to experience average investment returns over decades, one must put up with how rare average returns are on an annual basis.
Getting “average” returns means treating extremes as an ordinary part of investing.
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Sources:
1. Chart above taken from “Historic Rebound Sends S&P 500 to New Highs”, Wall Street Journal, June 27, 2025. Accessed online: https://www.wsj.com/finance/stocks/historic-rebound-sends-s-p-500-to-new-highs-44775c62
2. “20 Things You May Not Know About Markets (or That Might Surprise You). #1 - Normal Stock Market Returns are Extreme”, June 20, 2025. Accessed online: https://mebfaber.com/2025/06/20/20-things-you-may-not-know-about-markets-or-that-might-surprise-you-1-normal-stock-market-returns-are-extreme/