The Big Picture
You’ve probably heard annual stock market returns historically average about 10%. It’s a real statistic… but it almost never shows up on a single calendar year.
Take the S&P 500 for example: between 1926 and 2025, it finished within a couple points of 10% exactly six times. Six years out of a hundred. [1]
So where does the 10% we hear about come from? Where did the other 94 years land? And if you have a retirement plan with a return figure sitting behind it, what does that figure actually indicate?
Starting with the figure: the 10% was never meant to describe a single year, but rather a long-term rate across decades. Individual years can land all over the place.
And that takes us to some good news: most of those other 94 years that missed the average ended up landing higher (roughly three out of four), and more than a third finished up 20% or more. The down years are real too though, with 1931 and 2008 being the most famous. [2]
Here’s where this comes back to you: long-term retirement planning assumptions are built on multi-decade figures, not an individual year that can swing in either direction. Nobody lives a multi-decade figure. You live one year at a time, and reading a statement for a negative year feels nothing like reading a 30 year average.
Being certain about next year’s returns would be great, but there’s a reason that every piece like this ends with a note that past performance does not indicate future results. This year is not obligated to resemble last year, for better or worse. The 10% figure describes a road that’s already behind us, and it says little about the immediate road ahead.
We often talk about financial discipline. Part of that discipline involves accepting the reality of our expectations.
Annual rainfall averages are real too. Wetlands still have dry days, and deserts still have downpours. Do you plan to move every time the weather changes?
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Laurel Financial Group is a separate entity from WFAFN.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
[1] Based on S&P 500 annual total returns, 1926 through 2025. Six calendar years finished between 8% - 12. Source: Slickcharts, “S&P 500 Total Returns by Year Since 1926.” compiled for S&P Dow Jones Indices data. https://www.slickcharts.com/sp500/returns
[2] Based on the same data set. Of the 94 calendar years that finished outside the 8% - 12% range, 54 years finished above it, 40 finished below. 38 years finished up 20% or more. 1931 and 2008 were the two largest declines in that period. Source: Slickcharts, “S&P 500 Total Returns by Year Since 1926.” https://www.slickcharts.com/sp500/returns
Take the S&P 500 for example: between 1926 and 2025, it finished within a couple points of 10% exactly six times. Six years out of a hundred. [1]
So where does the 10% we hear about come from? Where did the other 94 years land? And if you have a retirement plan with a return figure sitting behind it, what does that figure actually indicate?
Starting with the figure: the 10% was never meant to describe a single year, but rather a long-term rate across decades. Individual years can land all over the place.
And that takes us to some good news: most of those other 94 years that missed the average ended up landing higher (roughly three out of four), and more than a third finished up 20% or more. The down years are real too though, with 1931 and 2008 being the most famous. [2]
Here’s where this comes back to you: long-term retirement planning assumptions are built on multi-decade figures, not an individual year that can swing in either direction. Nobody lives a multi-decade figure. You live one year at a time, and reading a statement for a negative year feels nothing like reading a 30 year average.
Being certain about next year’s returns would be great, but there’s a reason that every piece like this ends with a note that past performance does not indicate future results. This year is not obligated to resemble last year, for better or worse. The 10% figure describes a road that’s already behind us, and it says little about the immediate road ahead.
We often talk about financial discipline. Part of that discipline involves accepting the reality of our expectations.
Annual rainfall averages are real too. Wetlands still have dry days, and deserts still have downpours. Do you plan to move every time the weather changes?
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Laurel Financial Group is a separate entity from WFAFN.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
[1] Based on S&P 500 annual total returns, 1926 through 2025. Six calendar years finished between 8% - 12. Source: Slickcharts, “S&P 500 Total Returns by Year Since 1926.” compiled for S&P Dow Jones Indices data. https://www.slickcharts.com/sp500/returns
[2] Based on the same data set. Of the 94 calendar years that finished outside the 8% - 12% range, 54 years finished above it, 40 finished below. 38 years finished up 20% or more. 1931 and 2008 were the two largest declines in that period. Source: Slickcharts, “S&P 500 Total Returns by Year Since 1926.” https://www.slickcharts.com/sp500/returns