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71 years of stock market data reveals investors may be happy in the New Year

After a nearly 29% total return for the S&P 500 this year, history suggests 2022 may see more gains for investors.

Truist Advisory Services co-chief investment officer Keith Lerner found that going back to 1950, when the S&P 500 had a total return of at least 25% in a year, stocks usually rose in the following year. The outcome during that 71 year stretch: stocks advanced 82% of the time, or 14 out of 17 instances.

As the data shows, however, it's not always sunshine and rainbows after a big year for stocks.

Two of the three years where stocks failed to rise after 25%+ annual gains were 1981 and 1990. Lerner points out both of those periods commenced with recessions. The other down year was 1962, which Lerner says was challenged by a "flash crash" and "deteriorating investor confidence."

Lerner doesn't see a recession in the cards for 2022, but acknowledges that it's likely stocks have more modest gains after a banner 2021.

"History is only a guide and should be used alongside other factors, such as the business cycle and fundamentals. Still, the studies reviewed on performance following years with robust market gains, strong price momentum, and shallow pullbacks lend further support to our base case outlook for 2022. That is, we still favor stocks and expect the bull market to extend, though at a much more modest pace relative to 2021. The data also suggest investors should anticipate more normal and deeper corrections relative to the unusually shallow pullbacks seen over the past year. Thus, we remain positive yet realistic entering the new year," Lerner explains.

Another up year for stocks on tap?
Another up year for stocks on tap?

To be sure, the market enters 2022 with considerable momentum that go a long way to nailing down a positive year ahead.

The S&P 500 notched its 70th record close of the year on Wednesday. As Yahoo Finance's Alexandra Semenova points out, the S&P 500 recorded a new all-time high every month this year. That makes 2021 among the best years ever for investors.

Meanwhile, well-known companies such as Apple, Home Depot, McDonald's, Coca-Cola and Procter & Gamble continue to hover around record highs.

"We encourage our clients not to get out, to stay in the market. When the recoveries hit, when the sentiment changes, it happens so quickly that often by the time you're able to get back into the market, you have already missed out," said Erin Gibbs, Main Street Asset Management chief investment officer, on Yahoo Finance Live.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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