In This Article:
The past couple of years have been prosperous for the stock market, with the S&P 500 (SNPINDEX: ^GSPC) surging by more than 64% since late 2022, as of this writing.
But as we head into 2025, many people are feeling uncertain about the future. Only around 38% of U.S. investors feel "bullish" about the market's six-month horizon, according to a December 2024 survey from the American Association of Individual Investors. That's down from around 53% in July 2024.
While there's no way to tell exactly where the stock market will be a few months or a year from now, history suggests there's very good news about the future.
Forget the market's short-term movements
It's easy to get caught up in the stock market's day-to-day fluctuations, and those ups and downs can be anxiety-inducing. The market can be volatile even in strong economic times, making it difficult to tell whether we're headed for a downturn or if it's just a short-term hiccup.
The good news, though, is that these fluctuations don't necessarily matter. What's far more important is the market's long-term potential.
Historically, the market has not only managed to recover from every downturn it's ever faced, it's also seen substantial positive returns over time.
Over the last 25 years alone, the stock market has faced some of the worst bear markets and crashes in history -- from the dot-com bubble burst in the early 2000s to the Great Recession to the COVID-19 crash. There have also been many other downturns in between, like the most recent slump throughout 2022.
Yet in that time, the S&P 500 has soared by a staggering 300%. If you had invested $5,000 in 2000 and simply let that money sit without making any additional contributions, you'd have around $20,000 by today -- despite all the ups and downs over the last 25 years.
Time in the market can reduce your risk
It's not just the last couple of decades that have been promising, either. Analysts at Crestmont Research studied the S&P 500's long-term performance over 20-year periods, and they found that every single one of those periods ended in positive total returns.
In other words, if you'd invested in the S&P 500 at any point throughout history and held your investment for 20 years, you'd have made money. Even if you'd invested just before a major market crash or if that 20-year period was particularly rough, you'd have ended with positive total returns.
It's impossible to predict what might happen to the market as we head into 2025, and past performance doesn't guarantee future returns. However, time is your most valuable resource when investing in the stock market.