Expect the Unexpected with Stocks
Ask investors what kind of return they expect out of stocks in any given year, and many will respond with the market’s historical average return. For the S&P/ASX 300 Index from January 1980 through December 2023, that’s been 12.7%. Unless you have a crystal ball, that’s a reasonable guess in any given year.
And yet, history shows us what we end up getting from stocks is likely to be far from the average. Since 1980, only 12 out of 44 years had returns within five percentage points of the 12.7% average. In the other 32 years, the average deviation was over 13 percentage points. Talk about an uncommon average!
Actual returns can deviate from expected returns because information and circumstances change. If the news is better than expected, markets may go up. Of course, the reverse is true if the news is disappointing. In a world with so many potential sources of news—the economy, elections, geopolitical conflict—it shouldn’t be surprising that we often receive returns either much higher or lower than the long-run average.
Calendar-Year Returns for the S&P/ASX 300 Index
1980–2023
Past performance is not a guarantee of future results.
This article originally appeared in Short N Sweet, a newsletter for Dimensional clients.
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