JP Morgan Guide to the Markets

The first quarter of 2026 is complete and J.P.Morgan has released the updated Guide to the Markets. One of my favorite charts in the report is below. It shows what I have always said, time in market is important, not timing! In this blog let’s take a deep dive into what the chart reveals.

What This Chart Really Says About Market Volatility

At first glance, the chart can feel unsettling. It shows a long history of sharp drops in the S&P 500 within individual years, some of them severe, paired against where the market finished by year‑end. Red dots plunge downward, gray bars swing wildly, and the message can look chaotic.

But the deeper meaning of the chart is not chaos. It is perspective.

Understanding the Two Stories in One Chart

This chart tells two different stories simultaneously:

• Intra‑year declines (the red dots)
  These represent the largest peak‑to‑trough drop that occurred during each calendar year. In simple terms, they show how volatile a market pull back can be. The severity of the pull back is not predictable but is always present. It often has little correlation to end of the year performance.
• Calendar‑year returns (the gray bars)
  These show how the S&P 500 actually ended the year, positive or negative.

When you line these two up side by side, a powerful insight emerges: market declines are common, but poor long‑term outcomes are much less frequent.

Volatility Is Normal, Even in Good Years

One of the most striking notes in the chart is printed directly under the title:

Despite average intra‑year drops of 14.2%, annual returns were positive in 35 of 46 years.

Let that sink in.

On average, investors experienced a double‑digit decline almost every year—even while most calendar years ended higher. In other words, feeling uncomfortable during the year has historically been part of the price of long‑term growth.

Look at many of the years with strong final returns.  Although most of the returns are positive,  you still see red dots showing pullbacks of 7%, 10%, or more along the way. The path upward was rarely smooth.

Big Drops Don’t Automatically Mean Bad Years

Another important lesson from the chart is that large intra‑year declines often did not prevent positive annual results.

Several years show declines of 15%–20% during the year, followed by solid positive returns by December 31. These are the years when headlines would have been most frightening, sentiment most pessimistic, and the temptation to exit the market strongest.

The chart quietly reminds investors that selling during a downturn often means missing the recovery.

Yes, Sometimes the Market Ends Down

The chart does not sugarcoat reality. There are years—such as during major crises—where steep intra‑year declines coincide with negative annual returns. Periods like the early 2000s and the Global Financial Crisis stand out, with deep drawdowns and painful year‑end losses.

These periods matter. They test discipline, patience, and financial plans. But the key point is context: these years are the minority, not the rule.

The Emotional Side of Investing

What this chart highlights better than almost any performance table is the emotional cost of investing.

Most investors don’t react to annual returns quoted years later. They react to what they feel in real time—during the red dots. Watching an account fall 10%, 20%, or more during the year can lead to fear‑based decisions, even when long‑term probabilities remain favorable.

The data suggests that successful investors are not those who avoid volatility, but those who accept volatility without abandoning their plan.

Time Matters More Than Timing

From 1980 through 2025, the average annual return of the S&P 500 shown here was roughly 10.7%, despite frequent and sometimes dramatic pull backs. The chart reinforces a familiar but often forgotten truth: time in the market has mattered far more than trying to time the market.

Pullbacks are not anomalies. They are structural features of equity investing.

What Investors Can Take Away

This chart is not telling investors to ignore risk or pretend losses are irrelevant. Instead, it teaches three key lessons:

• Intra‑year declines are normal, even in strong markets.
• Short‑term volatility does not reliably predict long‑term outcomes.
• Staying invested through discomfort has historically been rewarded.

The red dots may grab attention, but the gray bars tell the lasting story.

The Bigger Picture

Ultimately, this chart reframes volatility as a companion—not an enemy—of long‑term investing. It shows that while markets frequently stumble along the way, recovery and positive returns happen more often than negative returns.

For investors with a long‑term horizon, the takeaway is clear: the goal isn’t to avoid downturns, but to survive them. And history suggests that those who do are far more likely to reach the other side.

Financial planning is a dynamic and ongoing process that involves careful preparation, routine evaluation of changing circumstances, and thoughtful decisions. Collaborating closely with your trusted financial advisor and estate planning professionals helps ensure a comprehensive, up-to-date, and tailored plan. One that is designed to address your unique needs and goals. Is your financial advisor setting the course and helping to steer your course? If not, why not? Contact us now to begin your journey with us.

This content was created with the assistance of artificial intelligence (AI). While efforts have been made to ensure the quality and reliability of the content, it is important to note that AI-generated content may not always reflect the most current developments or nuanced human perspectives.