Last year, the S&P 500 rose almost 29%. But investors have had to adjust their expectations for 2020.
The coronavirus pandemic has made for a wild ride: After reaching highs on February 19, the S&P 500 fell almost 34% to a low on March 23. Since then, the market has regained some ground. As of April 20, it is down 16.6% since the February highs and down more than 20% for the year.
While most experts will tell you to ignore the markets in the short-term and stick to a predetermined strategy, it's fair to ask what kinds of returns should you realistically expect to see from your investments, both under normal circumstances and in 2020.
"Historically speaking, market [returns] averaged right around 10% over the past 100 years," says Chris Cook, president of Beacon Capital Management in Dayton, Ohio. In other words, in a typical year over the past century, an investor's portfolio would grow by 10%.
But Cook says that isn't exactly a smooth ride. "That's just an average," he says, adding that "you may see a return of 20% one year, zero another." That's why it's important to have a long-term view as an investor.
While the historical numbers can offer investors some comfort, analysts say it's tough to gauge right now where the markets could settle in 2020. By late March, several chief market strategists at major firms had suspended their year-end targets on the S&P 500, saying that projecting where the benchmark index will end up is a fool's errand given current economic uncertainty.
Cook says that his best guess is that the market ends 2020 down around 10%. Or, "best case," he says, it breaks even.
"It feels like the worst has passed now," Cook says, and for most investors, 2020 should end with an "acceptable loss." For perspective, during 2008, the market ended the year down 38.5%.
Strategists surveyed by CNBC forecast that the S&P 500 will end the year nearly 12% lower, based on their median estimate as of mid-April.
But 2020's returns will ultimately depend on what happens over the next few months, cautions Rich Steinberg, chief market strategist at The Colony Group. "[Corporate] earnings might not return to normal for a couple of years," he says. "We may have a whole different dynamic of global supply chains, and could end up in a global world of protectionism" that cause a longer economic slowdown.
The market will go up and down many times during your investing journey. The key is to learn to come to terms with those swings and maintain a long-term perspective. In fact, experts say that, as long as you invest regularly and manage your risk, the coronavirus pandemic — and the resulting stock-market downturn — may help you get ahead.
"You need to be thinking out past the short-term noise," says Steinberg. "Don't just chase the shiny objects," like the investors who try to time the market or jump on hot stocks that may ultimately end up being risky bets.
Video by Stephen Parkhurst
For young investors or those who are just starting to build their portfolios, Steinberg says the current state of the markets gives people a great opportunity to "slowly start to dollar-cost average into the market." That means investing small amounts at regular intervals, which can help you take advantage of lower prices and, over time, smooth out the amount you pay for a given asset.
Cook agrees, saying that younger investors, in particular, are "not in a bad position."
The current downturn is "an opportunity to buy things on sale — we know the market will come back, we just don't exactly when," he says. And when the economy is able to open back up and, assuming the market starts producing average annual returns again, investors who start now will be better off in the long run.
"You may not make any money this year," Cook says, but if you invest through the downturn, by the end of the year, "your money could be working for you."
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