The stock market is often driven by fear, which can lead to significant downturns and volatility. Fear can cause investors to sell off stocks quickly, seeking safer assets like money-market securities and stable-value funds, even though this might not be the best long-term strategy.
However, one-year returns tell investors very little. Vanguard founder John Bogle once wrote, "Reversion to the mean is a rule of life in the investing world." He compared the phenomenon to gravity. An index may outperform or underperform its historical average during certain periods, but performance is typically pulled back to the average over time.