Will the Stock Market Revert to the Mean in 2022?

What are most advisors and clients thinking about right now?

What’s the stock market going to do in 2022? Many think the stock market is in for a bumpy ride.

Below are charts and data you can use to help prepare clients so they don’t freak out when their portfolios experience bigger drawdowns in 2022.

Low Drawdown Risk–Multi-Manager Portfolios

If you are not using multi-manager portfolios to mitigate risk for your clients, why not?  What about tactical strategies built to manage risk? Or what’s better, what about multi-manager portfolios made up of 3-5 different tactical managers

If you want to learn about several different multi-manager portfolios that use 3-5 tactical money managers, click on the following link:


2 Standard Deviations Above the Mean

Does anyone think Monte Carlo simulators are accurate? Most do NOT because they include outlier returns that almost never happen but could be within the range of “2 standard deviations.”

Going “2 standard deviations” out is rare and the following chart shows THREE times since 1950 that the stock market heights have reached “2 standard deviations above its mean” returns.

                Shortly after the first two, the market crashed!  Will it crash in 2022? Well, it could which is why using multi-manager tactical portfolios can be your savior (much more so than singular tactical managers or certainly buy/hold portfolios).

Average Drawdown After a Calm Year in the Market

                The following chart is really a good one and I’d recommend you give it to all of your clients to review. The chart shows the following intra-year drawdown following a year with low drawdowns.

                In 2021, the market had very low drawdowns with a MAXIMUM of only -5%. Clients were spoiled in 2021 and they may have unrealistic expectations of the volatility of the market for 2022. 

                The following chart will help set their expectation to EXPECT larger drawdowns in 2022. The average in the chart below is -13%. The GOOD NEWS is that the average return is a POSITIVE 7% in the chart.


The following chart will help you do that!

Roccy DeFrancesco, JD, CAPP, CMP
Founder, The Wealth Preservation Institute
Co-Founder, The Asset Protection Society