Thanks for this great question about how markets have historically recovered from downturns. The largest intra-year drawdown for the S&P 500 this year has been about 9% - while the factors driving this are unique, the fact that the market experiences pullbacks on a periodic basis is not. While the past is no guarantee of the future, understanding these patterns can help put this year's market swings into perspective.
Here is what history tells us:
• The S&P 500 has historically recovered from even major downturns, including the tech bubble, the 2008 financial crisis, and the 2020 pandemic, often going on to reach new all-time highs. However, events such as these are rare. Markets do experience smaller pullbacks frequently. Since 1980, the S&P 500 has experienced pullbacks of 10% or less once each year, with pullbacks of 5% or less occurring four or five times, on average.
• Historically, the market can recover from these pullbacks when investors least expect it. This is because investor sentiment is often the worst right before markets begin to rebound. The average market correction sees the S&P 500 decline around 14%, and the recovery typically takes 4 months or less. It's difficult to predict exactly when markets might recover, so it's often best to simply stay invested and focused on long-term goals.
• Waiting on the sidelines for the "right" moment to invest has historically been costly. Investors waiting for a 5% single-day decline in the S&P 500 waited an average of 303 days and missed an average return of 13.8% during that period. Meanwhile, cash is still yielding less than inflation, so not only do investors who exit the market often miss recoveries, but they also experience an erosion of their purchasing power as well.
• The last several years have underscored this point. In 2025, when markets fell to almost bear market levels, they also rebounded more quickly than many investors expected. The same was true in mid-2020, even as the pandemic continued to impact the economy.
While short-term market disruptions can feel unsettling, history shows that patient, disciplined investors who stay focused on the long term have been consistently rewarded over time.