Jan

3

A quick check of the last 61 annual changes in the S&P 500 index shows no significant difference in net changes between years immediately following changes of 20% or more and other years. The average net change one year after a gain of 20% or more was 11%, slightly higher than the average net change of 8%, but with t=0.79, so consistent with randomness.

Sorted by previous year change:

Date        Close   Change  Previous year change
12/30/1955   45.48     26%     45%
12/31/1959   59.89      8%     38%
12/31/1996  740.74     20%     34%
12/31/1976  107.46     19%     32%
12/31/1998 1229.23     27%     31%
12/31/1990  330.22     -7%     27%
12/31/1999 1469.25     20%     27%
12/31/1956   46.67      3%     26%
12/31/2004 1211.92      9%     26%
12/31/1986  242.17     15%     26%
12/31/1992  435.71      4%     26%
12/31/1981  122.55    -10%     26%
12/31/2010 1257.64     13%     23%
12/31/1962   63.10    -12%     23%
12/31/1997  970.43     31%     20%
12/31/1968  103.86      8%     20%
——————————

——————–
12/29/2000 1320.28    -10%   19.5%
12/30/1977   95.10    -12%     19%
12/31/1964   84.75     13%     19%
12/31/1984  167.24      1%     17%
12/31/1952   26.57     12%     16%
12/31/1973   97.55    -17%     16%
12/30/1983  164.93     17%     15%
12/31/1987  247.09      2%     15%
12/31/2007 1468.36      4%     14%
12/31/1965   92.43      9%     13%
12/30/2011 1257.60      0%     13%
12/29/1989   353.4     27%     12%
12/31/1980  135.76     26%     12%
12/31/1953   24.81     -7%     12%
12/29/1972  118.05     16%     11%
12/30/1966   80.33    -13%      9%
12/30/2005 1248.29      3%      9%
12/30/1960   58.11     -3%      8%
12/31/1969   92.06    -11%      8%
12/30/1994  459.27     -2%      7%
12/31/1993  466.45      7%      4%
12/31/2008  903.25    -38%      4%
12/29/2006 1418.30     14%      3%
12/31/1957   39.99    -14%      3%
12/30/1988  277.72     12%      2%
12/31/1985  211.28     26%      1%
12/31/1979  107.94     12%      1%
12/31/1971  102.09     11%      0%
12/31/2012 1426.19     13%      0%
12/29/1995  615.93     34%     -2%
12/29/1961   71.55     23%     -3%
12/31/1991  417.09     26%     -7%
12/31/1954   35.98     45%     -7%
12/31/1982  140.64     15%    -10%
12/31/2001 1148.08    -13%    -10%
12/31/1970   92.15      0%    -11%
12/29/1978   96.11      1%    -12%
12/31/1963   75.02     19%    -12%
12/31/2002  879.82    -23%    -13%
12/29/1967   96.47     20%    -13%
12/31/1958   55.21     38%    -14%
12/31/1974   68.56    -30%    -17%
12/31/2003 1111.92     26%    -23%
12/31/1975   90.19     32%    -30%
12/31/2009 1115.10     23%    -38%
 
Of the 58 years from 1951 to 2008, 49 were followed by at least one down year within the next four. The only exceptions were 1981-1985, 1994-1995, and 2002-2003 (and each of these periods included at least one year with a 20% or greater gain).

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