do stocks only go up? Explained

Do stocks only go up?

As an investor or curious reader you may have asked, "do stocks only go up" — or seen it as a meme on social feeds. The direct answer is: historically broad equity markets have tended to rise over long horizons, but stocks do not only go up. Markets experience crashes, secular bear periods and episodes when inflation erodes real returns. This article explains what people mean by "do stocks only go up", reviews the evidence and exceptions, and lays out practical implications for portfolio construction and risk management.

As of January 20, 2026, according to CNN, markets remained sensitive to geopolitics and policy: US equities and Treasuries briefly sold off amid headlines, yet the S&P 500 was trading within a few percent of record highs — a reminder that short-term shocks often coexist with longer-term trends.

Definition and scope: what people mean by "do stocks only go up"

When investors ask "do stocks only go up" they are usually testing a belief that equity prices inevitably increase over time. To answer properly we must be explicit about scope:

• Nominal vs real returns: nominal returns are the raw percentage gains in prices plus dividends; real returns adjust for inflation. A positive nominal return can still be negative in real terms if inflation is high.
• Individual stocks vs broad indices: an individual company can fail and its shares fall to zero; broad market indices (e.g., large‑cap indexes) aggregate many firms and historically show different long‑run behavior.
• Market universe and time horizon: outcomes differ across countries, sectors and decades. U.S. large‑cap stocks over the 20th century produced strong long‑run returns, but other regions or shorter windows show different results.

When we examine "do stocks only go up", we therefore mean: do broad equity markets reliably produce positive (nominal and/or real) returns across long holding periods, and are there important exceptions?

Historical evidence

Long‑term upward trend

Over long time horizons, equity markets have tended to increase in value. Multiple long‑run datasets (Ibbotson, Dimson/Marsh/Staunton (DMS), T. Rowe Price and other institutional studies) show that U.S. large‑cap stocks delivered roughly 9–10% annualized nominal returns across the 20th century into the 21st, with long‑run real returns commonly estimated near 6–7% after inflation. Those averages reflect price appreciation plus dividends compounded over decades.

Common empirical regularities that support the idea that stocks usually go up over long periods:

• Positive nominal average returns across many long samples for broad indices.
• Increasing corporate earnings and productivity growth that underpin rising equity cash flows over time.
• High positive frequency of rolling multi‑year windows producing gains: the probability of positive nominal returns rises with horizon (for example, 1‑year outcomes are volatile and often negative, while 10+ year rolling periods historically have had a high probability of positive nominal returns).

These long‑run facts explain why many financial plans assume equities are a long‑term wealth generator.

Notable exceptions and secular bear markets

Stocks have not only gone up. There are historical episodes when broad markets stagnated or fell in real terms for extended periods.

Key examples:

• Mid‑1960s to early 1980s (the "secular bear"): U.S. equities underperformed for roughly 15 years. High inflation in the 1970s eroded real returns, and the decade produced weak nominal gains relative to prior periods.
• The 2000s "lost decade": From 2000–2009 the U.S. large‑cap index produced near‑zero or slightly negative annualized nominal returns once dividends and the subsequent 2008‑09 crisis are included, particularly for price‑only measures. Real returns were weak.
• Great Depression and wartime shocks: the 1929–1930s era, and some wartime or post‑war transitions in other countries, produced dramatic losses and long recoveries.

These episodes show that long, non‑trivial stretches can deliver poor outcomes — especially when price falls combine with sustained inflation or weak earnings growth.

Quantitative statistics (typical long‑run findings)

While datasets and methodologies vary, representative results cited in long‑run studies include:

• Average nominal annual return for U.S. large‑cap equities: roughly 9–10% across the 20th century into the early 21st century (including price change + dividends).
• Average real annual return (after US inflation): roughly 6–7% in many long samples.
• Rolling horizon win rates: the probability of a positive nominal return increases with horizon. Short horizons (days–months) are noisy; 10–20 year rolling windows historically show a very high frequency of positive outcomes, but not 100%.

Sources such as Dimson/Marsh/Staunton (global equity research), T. Rowe Price (125‑year review), and independent advisors summarize these patterns and document exceptions.

Why stocks tend to rise over time

Understanding the drivers clarifies why equities often outpace safer assets over long horizons.

Economic growth and corporate earnings

Equity value ultimately reflects expected future corporate cash flows (earnings, dividends, or free cash flow). Over long periods, real economic growth (population + productivity) tends to expand aggregate corporate revenues and profits, which supports rising equity valuations when the expected earnings stream grows.

Compounding matters: reinvested profits, technological improvements and scale can lead firms to generate larger cash flows over decades, lifting market caps and index values.

Risk premium and compensation for risk

Investors expect compensation for bearing equity risk — the equity risk premium. Because equities are riskier than cash or government bonds (higher volatility, drawdown risk, and uncertain payouts), investors historically demanded (and received) higher expected returns. That risk premium explains a meaningful part of the long‑run excess return of stocks over safe assets.

Payouts to shareholders: dividends and buybacks

Dividends and share repurchases return current cash to shareholders and form part of total return. Reinvested payouts compound over time and smooth returns when price appreciation is uneven.

Institutional and policy support

Monetary and fiscal policy, regulatory frameworks, and institutional investors influence asset prices. Central bank actions (rate changes, quantitative easing) and government support (bailouts, policy guarantees) can bolster valuations and reduce tail risks — at least temporarily. That institutional backstop can encourage investors to hold risk assets during stress.

Why stocks do not only go up — limits and risks

While the long‑run drivers are persuasive, several concrete risks mean equities are not a guaranteed upward path.

Market volatility and drawdowns

Equities experience large swings. Bear markets (drops of 20%+) and crashes (50%+) occur periodically. Even if average long‑run returns are positive, sequence‑of‑returns risk matters for investors reliant on near‑term withdrawals.

Example: a significant market decline early in retirement can materially reduce sustainable withdrawal rates.

Inflation and real returns

High inflation can erase nominal gains. T. Rowe Price and other long‑run studies highlight inflation tipping points at which equities struggle to deliver positive real returns over extended periods. The 1970s stagflation in the U.S. is a classic example: nominal returns were muted while inflation sharply reduced purchasing power.

Permanent loss of capital and corporate failures

Individual firms can and do fail. Stocks can go to zero if a business becomes insolvent. Even broad indices can experience permanent real capital erosion if systemic crises combine with inflation, policy failure or structural economic collapse.

Concentration risk and structural change

When markets are driven by a handful of very large companies (index concentration), index returns can hide fragile breadth. Structural changes — technological disruption, regulatory shifts, trade policy, resource constraints — can change which sectors lead and for how long.

Behavioral and market‑structure explanations

Supply/demand and price formation

Prices are formed by supply and demand of shares: current prices reflect the marginal buyer and seller, flows into/out of funds, and changing investor expectations. Short‑term moves often reflect liquidity and order flow rather than changes in fundamentals.

Investor psychology: the "stocks only go up" meme

"Do stocks only go up" is also a behavioral shorthand used by bullish communities. It can signal complacency — assuming perpetual gains — which can lead to underestimating risk, neglecting diversification, or mistiming exits. Overconfidence and herd behavior can amplify booms and busts.

The role of central banks: "don't fight the Fed"

Monetary policy influences discount rates and liquidity, which affect valuations. The phrase "don't fight the Fed" captures the idea that when central banks ease aggressively, risk assets often rise. However, relying solely on policy support is risky: policy can change (rates can rise), and interventions can create distortions and moral hazard.

Investment implications and best practices (neutral, non‑advisory)

This section presents general principles without specific investment advice.

Time horizon and compounding

Longer holding periods historically increase the probability of positive nominal returns for broad equity allocations, because short‑term volatility tends to average out and compounding of earnings/payouts works in investors' favor. Nevertheless, long horizons are not a guarantee — inflation and structural episodes can still produce poor real outcomes over extended periods.

Diversification and risk management

Diversify across:

• Asset classes (equities, bonds, cash, real assets).
• Sectors and geographies to avoid concentration risk.
• Styles and capitalization ranges.

Diversification cannot eliminate all loss, but it reduces dependence on any single failure.

Staying invested vs market timing

Evidence suggests missing a small number of the market's best days can materially reduce long‑run returns; attempts to time the market often underperform a disciplined buy‑and‑hold or rebalanced approach. That said, review and adjust portfolios to reflect changing financial goals and risk tolerance.

Tactical responses: dollar‑cost averaging, rebalancing, hedging

• Dollar‑cost averaging (systematic contributions) reduces sequence‑of‑returns risk for new capital.
• Periodic rebalancing enforces taking profits and buying underperformers, usually improving risk‑adjusted returns over time.
• Hedging (options, allocation to safe assets) can limit downside but comes with costs and complexity.

When discussing exchanges or custodial solutions, consider security, compliance, and features. For readers exploring trading or custody in crypto‑enabled ecosystems, Bitget offers exchange services and Bitget Wallet for self‑custody; compare security and regulatory features before choosing a provider.

Alternative and contrarian views

Some analysts argue that structural headwinds (high debt levels, resource limits, demographic slowdown, or persistent low productivity) could reduce long‑run equity returns compared with historical averages. Others point to valuation risk: if prices incorporate overly optimistic future growth, expected returns may be compressed.

Academic debates also emphasize limitations of historical extrapolation: survivorship bias (failed firms/markets drop out of datasets), changing monetary regimes, and cross‑country heterogeneity mean past performance is an imperfect guide.

Empirical sources and studies

Major long‑run sources and what they show:

• Dimson/Marsh/Staunton (DMS): global returns across countries and centuries show wide variation but general long‑run equity premium.
• T. Rowe Price (125 years): long‑run U.S. dataset showing sustained positive nominal returns but highlighting inflationary tipping points and secular variation.
• Financial blogs and research (A Wealth of Common Sense, Wealthsimple, Schroders, etc.) provide accessible syntheses of historical data and narratives about bear markets and structural drivers.

When you read studies, check methodology: total return vs price return, sample period, currency and inflation adjustments, and whether results include dead firms or only surviving indices.

Practical FAQ

Q: If historical returns are positive, should everyone invest heavily in equities?
A: Not necessarily. Asset allocation depends on goals, time horizon, risk tolerance and liquidity needs. Equities are more appropriate for long‑term goals where the investor can tolerate volatility.

Q: Can inflation make equities a bad choice?
A: High inflation can reduce real returns. In some inflationary regimes, real equity returns have been weak. Diversified allocations including real assets and inflation‑linked bonds can help manage inflation risk.

Q: Are U.S. stocks guaranteed to outperform other assets?
A: No. Relative performance depends on valuation, economic conditions, and future growth; other regions or asset classes may outperform in different regimes.

Q: What about tokenized equities and 24/7 trading announced by major exchanges?
A: Market infrastructure is evolving, including tokenization and extended trading hours in some markets. These changes affect liquidity, settlement and accessibility. If using crypto‑native rails or wallets, prioritize secure custody solutions such as Bitget Wallet and verify regulatory compliance.

See also

• Equity risk premium
• Bear market
• Secular bear market
• Inflation and real returns
• Diversification
• Dollar‑cost averaging
• Market microstructure

References (selected)

• "Stocks only go up...until they don't: A history lesson and a forecast" — Resilience / Resource Insights.
• A Wealth of Common Sense — various posts on long‑run returns and "Why the stock market usually goes up."
• Wealthsimple — "Why do we think stock markets will go up over time?"
• Dentist Advisors — "Why Do Stocks Go Up Over Time?"
• T. Rowe Price — "125 years of returns: Timeless lessons in investing"
• Quora thread: "Why do my stocks go down? I heard stocks only go up."
• Desjardins — "What Causes Stock Prices to Change?"
• Schroders commentary and supplementary investor videos on market cycles and policy effects.

Note: these references summarize long‑run datasets and narrative analysis used throughout this article. When reviewing empirical claims, consult the original studies for exact methodology and figures.

Final summary and next steps

Equities have historically been strong long‑term generators of nominal wealth, which is why many investors ask "do stocks only go up" with expectations of perpetual gains. Reality is more nuanced: stocks often rise over long horizons because of economic growth, corporate earnings and a persistent equity risk premium, but they can and do experience extended drawdowns, real‑return erosion during high inflation, and permanent losses at the individual security level.

If you are building or reviewing a portfolio, think in terms of time horizon, diversification, risk controls, and the costs and security of the trading/custody platforms you use. To explore trading, custody and tokenized asset features with security and compliance in mind, consider Bitget exchange services and Bitget Wallet as part of your due diligence.

For ongoing market context: as of January 20, 2026, news coverage highlighted how policy, geopolitics and bond market dynamics continue to influence equity volatility — a timely reminder that short‑term headlines can cause sharp moves even when long‑term drivers remain intact.

Further reading: consult the long‑run studies listed above and ask whether reported returns are nominal or real, which dataset the study uses, and how survivorship or selection bias may affect conclusions.

Want to learn more about managing volatility and building resilient allocations? Explore Bitget learning materials and Bitget Wallet features to help you evaluate custody options and trade securely.