So far, the markets have ushered in the new year with a whimper.
Falling Chinese stocks and soft manufacturing data led to a very weak first day of the year trading performance — the worst in eight years. Tuesday's gains were barely anything, leaving the S&P 500 still down 1.3 percent for the year — a truly uninspiring start to 2016.
But don't panic. This has happened before, and it usually ends fine. At least seven other years since 1978 have also started off with two days this bad or worse, and five ended up positive for the year. Four of those years — 1980, 1982, 1985 and 1992 — were up 10 percent or more.
The Big Crunch used S&P 500 historical data since 1978 to build a probability curve for each weekday of the year. It turns out that even with a year-to-date negative return in the summer, the chances of ending the year positive are still 50/50.
Hover on the interactive chart below to see the odds change during the course of the year. Notice it keeps going down — which makes sense. The longer the market stays negative during the course of the year, the harder it is to end up finishing positive. But being negative anytime in the first quarter still means there is a better than 50/50 chance of finishing positive.
About 75 percent of all the years tracked ended positive, and a negative first week only hurt those odds a little bit. It's not until the last two weeks that all hope is truly lost — that's when a negative YTD return practically guarantees a negative year.
Here's the thing: The market can start off negatively in January and still have a big chance of having a huge year, like a 10 or 20 percent return. Notice the green and black lines here. The market can still be negative into the second half and still have a good chance of a solid double-digit positive return.
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