20% PLUS unsustainable? from Steve Ellison
A quick check of the last 61 annual changes in the S&P 500 index shows no significant difference in net changes between years immediately following changes of 20% or more and other years. The average net change one year after a gain of 20% or more was 11%, slightly higher than the average net change of 8%, but with t=0.79, so consistent with randomness.
Sorted by previous year change:
Date Close Change Previous year change
12/30/1955 45.48 26% 45%
12/31/1959 59.89 8% 38%
12/31/1996 740.74 20% 34%
12/31/1976 107.46 19% 32%
12/31/1998 1229.23 27% 31%
12/31/1990 330.22 -7% 27%
12/31/1999 1469.25 20% 27%
12/31/1956 46.67 3% 26%
12/31/2004 1211.92 9% 26%
12/31/1986 242.17 15% 26%
12/31/1992 435.71 4% 26%
12/31/1981 122.55 -10% 26%
12/31/2010 1257.64 13% 23%
12/31/1962 63.10 -12% 23%
12/31/1997 970.43 31% 20%
12/31/1968 103.86 8% 20%
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12/29/2000 1320.28 -10% 19.5%
12/30/1977 95.10 -12% 19%
12/31/1964 84.75 13% 19%
12/31/1984 167.24 1% 17%
12/31/1952 26.57 12% 16%
12/31/1973 97.55 -17% 16%
12/30/1983 164.93 17% 15%
12/31/1987 247.09 2% 15%
12/31/2007 1468.36 4% 14%
12/31/1965 92.43 9% 13%
12/30/2011 1257.60 0% 13%
12/29/1989 353.4 27% 12%
12/31/1980 135.76 26% 12%
12/31/1953 24.81 -7% 12%
12/29/1972 118.05 16% 11%
12/30/1966 80.33 -13% 9%
12/30/2005 1248.29 3% 9%
12/30/1960 58.11 -3% 8%
12/31/1969 92.06 -11% 8%
12/30/1994 459.27 -2% 7%
12/31/1993 466.45 7% 4%
12/31/2008 903.25 -38% 4%
12/29/2006 1418.30 14% 3%
12/31/1957 39.99 -14% 3%
12/30/1988 277.72 12% 2%
12/31/1985 211.28 26% 1%
12/31/1979 107.94 12% 1%
12/31/1971 102.09 11% 0%
12/31/2012 1426.19 13% 0%
12/29/1995 615.93 34% -2%
12/29/1961 71.55 23% -3%
12/31/1991 417.09 26% -7%
12/31/1954 35.98 45% -7%
12/31/1982 140.64 15% -10%
12/31/2001 1148.08 -13% -10%
12/31/1970 92.15 0% -11%
12/29/1978 96.11 1% -12%
12/31/1963 75.02 19% -12%
12/31/2002 879.82 -23% -13%
12/29/1967 96.47 20% -13%
12/31/1958 55.21 38% -14%
12/31/1974 68.56 -30% -17%
12/31/2003 1111.92 26% -23%
12/31/1975 90.19 32% -30%
12/31/2009 1115.10 23% -38%
Of the 58 years from 1951 to 2008, 49 were followed by at least one down year within the next four. The only exceptions were 1981-1985, 1994-1995, and 2002-2003 (and each of these periods included at least one year with a 20% or greater gain).