Last week, I mentioned that the U.S. stock market has been on a run over the past three years. Here are the annual returns :
- 2023: +26.3%
- 2024: +25.0%
- 2025: +17.9%
And if you thought we were due for a down year in 2026 because, on average, the U.S. stock market posts a negative year once out of every four years, well, think again. Since January, the S&P 500 is up over 8%, and we’re not even halfway through the year yet.
It’s also not just American stocks that have had a few good years. Here are the three-year returns for MSCI Emerging Markets:
- 2023: +10.3%
- 2024: +8.1%
- 2025: +34.4%
Here are the MSCI Developed Market returns:
- 2023: +24.4%
- 2024: +19.2%
- 2025: +21.6%
Pretty much everywhere you look, stocks have gone up. Even alternative assets like gold, silver, and Bitcoin have seen great returns over the past handful of years.
There have also been a lot of worrying economic headlines over the past three years. From bank failures, a rising U.S. debt ceiling, “higher for longer” interest rates, the Yen carry trade collapse, the “Liberation Day” tariffs, constant worries about inflation, AI labor concerns, the war in Iran, and on and on.
There have been serious worries of a recession and a stock market collapse every single year.
Yet, despite all of the worry and sentiments of “this can’t last,” the S&P 500 has climbed to an 83% total return since 2023.
Now, you can’t bank on nearly doubling your money every three years in the stock market. There will be market corrections and recessions in the future. But that’s why it’s so important to make sure you take advantage of these high-returning years.
Since 1970, the average annual return for the S&P 500 is just over 11%.
However, the actual returns from January to December each year are extremely variable. There are hardly any years when the market simply goes up 11%:
In fact, 2016 was the only year out of the last 56 where we saw an 11% return.
Projecting out future returns on a spreadsheet or compound calculator is nice and tidy. But in the real world, growing your money in the stock market is lumpy and messy.
You’ll have three straight years of nearly double-digit losses, like from 2000 to 2002, and you’ll also have five straight years of 20%+ gains, like from 1995 to 1999.
Because there will be crashes, corrections, and years where your money won’t grow at all, you need to be invested and take advantage of the years, like the past three, where the market goes up quickly in a short amount of time.
If you were able to hang around through the down years and take advantage of the good years to get that 11% annual return over the past 56 years, an initial $10,000 investment in 1970 would be worth over $3.5 million today.
Compound interest is pretty cool.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.