The stocks in the market go up and down

Figure 1

This is my grandson, Cassian Alexander Nix Mills.  He is going to be 2 in March.  I had a chance to visit with him for a week at the end of 2018 and found out that his favorite song was “Wheels on the Bus.”

I gotta tell you I heard this song so many times while I was visiting him and other family members that I almost got sick of it.  So, in light of what has happened in the stock market this past year I changed the words from, “The wheels on the bus go round and round, round and round, round and round … to … The stocks in the market go up and down, up and down, up and down.  The stocks in the market go up and down all through the year.”

Of course he looked at me like I didn’t know what I was talking about … even though I think I do.

This is how the major indices ended up in 2018 and how they look since President Donald Trump was elected back in November 2016:

Stock indices 2018
Figure 2

As you can see, the indices (Dow Jones Industrial Average, S&P 500 and the NASDAQ Composite) were all down between 4.3% and 6.6% for the year 2018.  Over all that is not real bad.  Since Mr. Trump was elected the markets have still showed adequate returns … up from 17% to almost 28%, depending on the index you are following.

Over the past 90 years (since 1928) the S&P 500 – the most followed index – has only seen 29 down years and you can see each year here.  This means that 68% of the time the stock market has finished higher than it has finished lower.  I can’t tell you how many times I had to remind clients of this phenomenon over the 42 years I worked in the financial services industry.  Due to True Capitalism the markets will go up more than they go down. In addition it is noteworthy the show that the market has only had four times when it has had consecutive down years back to back.  These were in …

  • 1929 – 1932 (4 years of the Great Depression)
  • 1939 – 1941 (3 years of the start of WWII)
  • 1973 – 1974 (2 years of a recession)
  • 2000 – 2002 (3 years including the “technology bubble burst” and the “War on Terror”)

Of the 29 down years we have had over the past 90 years … 20 have been down double digits ranging from -10.14% to – 47.07%. The average down year for all down years was -15.02%.  Of the 61 up years the minimum positive return for a year was +0.1% and the maximum positive return for a year was +46.59%.  The average up year return over all up years was +18.42%.  Of the 61 up years … 46 years saw double-digit growth ranging from 10.26% to 46.59%.

Now here is something interesting.  Years following a down year where the next year was actually up saw this kind of growth:

  • 1933 following down years of 1929 to 1932 = +46.59%
  • 1935 following down year of 1934 = +41.37%
  • 1938 following down year of 1937 = +25.21%
  • 1942 following down years of 1939 to 1941 = +12.43%
  • 1949 following down years of 1946 to 1948 = +10.26%
  • 1954 following down year of 1953 = +45.02%
  • 1958 following down year of 1957 = +38.06%
  • 1961 following down year of 1960 = +23.13%
  • 1963 following down year of 1962 = +18.89%
  • 1967 following down year of 1966 = +20.09%
  • 1970 following down year of 1969 = +0.10%
  • 1975 following down years of 1973 and 1974 = +31.55%
  • 1978 following down year of 1977 = +1.06%
  • 1982 following down year of 1980 = +14.76%
  • 1991 following down year of 1990 = +26.31%
  • 1995 following down year of 1004 = +34.11%
  • 2003 following down years of 2000 through 2002 = +26.38%
  • 2009 following down year of 2008 = +23.45%
  • 2016 following down year of 2015 = +9.54%
    • Total number of “Come Back Years” over the past 90 = 19
    • Total number with double-digit gains year of come back = 16
    • Average Gain in all years following last down year prior = +23.60%

The Point being made:

The market will come back eventually.  I cannot tell you if 2019 will be a down year on top of a down year (such as we had in 4 times in the past 90 years) but I can tell you that when the market does come back … if it is only an average come back you are likely looking at double digit gains.  Therefore, you need to take a hard look at your portfolio and determine now if there are stocks you want to get out of (if you did not do this in December for tax purposes) or if the stock you have now should be held.  Talk with your financial advisor before making any adjustments – or do some critical analysis looking at company financials and technical data.

As you think about it consider this:


Figure 3

My feeling is that 2019 will be a positive, yet volatile, year for the stock market in general.  We have a border wall that really needs to be started or we need to shut up about it.  We have trade wars and embargos that need to be negotiated in America’s favor.  And we have a FED that is no longer propping up the stock market as it has over the past several years (and should not do again).

If your the type of person that Plans Life … you should also Plan Investments.

While some people do walk through life aimlessly … most of them don’t.  Many have at least some idea where they are going and some know exactly where they are going and when they are going to get there.  It’s all about setting goals then developing, implementing and monitoring a plan to achieve those goals.

Someone once said, if a mad does not know where he is going … any road will take him there.

Fork in the road
Figure 4

Have you reached a Fork in the Road?  Do you know which to take?  Or, will you walk aimlessly and hope that you will find your way out of the woods?  I think it all starts with goals.

As your other goals in life … your financial goals must be written as S.M.A.R.T Goals.  What do I mean by Smart Goals?

They must be …  SMART









This is a good article for the first working day of the year and you can get a brief review of this system for writing goals such as this right here.  Or, if you are a reader, you can read about them here.

In setting these “Smart Goals” please don’t let them keep you from “Dreaming the Impossible Dream” goal.  This guy – Brendon Burchard – does not believe in “Smart Goals” he suggest that you consider Dumb Goals …


You can view his ideas here. Or, again you can read about them here.

Personally I like them both.  However, neither will do any good if they are not in writing and you don’t have a plan in writing to accomplish them.

This is the simplicity in reaching your goals …

Plan Steps
Figure 5

The larger the step … the harder it is to accomplish.  It is easy to dream … easy to write the goal … a little harder to write the plan … harder yet to implement the plan and monitor and update the plan.  Why is the last step so high then?  Because I have found that people who are used to setting goals and accomplishing them usually spend much of their time doing it again and again and take so little time to enjoy their accomplishments.  You must take time to enjoy the fruit of your labor or it is simply no good to labor.  Life is too short not to enjoy your accomplishments.

The stock market (many call it Mr. Market) has a mind of its own.  You cannot control it alone.  If you are reading this article you don’t have enough money to influence the market – at least I don’t think Mr. Buffett, Mr. Gates or Mr. Soros are reading this article.  Nor do I think the President of the Federal Reserve or the President of the United States are reading this article.  All we common folk can do is learn to make do with what the market gives us.

As a General, leading an army into battle with a known or unknown enemy … you would not consider battle until you first have a plan.  A plan to get it … A plan to achieve Victory … and a plan to get out.  The same can be said about investing in the stock market.  It is a battle with an unknown force.  You need a plan to get in … a plan that will allow success … and a plan that will get you out before you are defeated.

In Summary …


Oh the stocks in the market go up and down … up and down … up and down.  Oh the stocks in the market go up and down … all through the year!

Have a great and prosperous 2019 y’all,

Jerry Nix, FreeWaveMaker, LLC



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