Over the past couple of weeks, we have experienced daily swings in the market that we are more accustomed to knowing as gains or losses for an entire year. The media loves to take these opportunities to capture headlines that only intensify our emotional reaction. It is precisely for these moments in the market that we strive to create a game plan with each client ahead of time, so that we do not have to question our investment strategy during the time of turbulent markets. I am writing this not to belittle the uncertainty we’ve seen in the market, because it is real, and we don’t know how long the volatility will last. What I hope to achieve is to help put the day-to-day swings into a broader context of how the market has historically reacted to major historical events like the Global Financial Crisis in 2008 and the COVID-19 Pandemic in 2020.
The 2-day market decline of 10.5% during April 3-4, 2025 was the worst two-day stretch for the S&P 500 Index since March 2020, and that news can cause a lot of anxiety. For comparison purposes, on October 15, 2008, the market declined by 9.03% in a single day. What I would like to highlight is the time frame it took the market to recover. October 15, 2008, was followed by the market recovering to the October 14, 2020 level just 15 days later, recording a return of 20.79% after 1 year and an annualized return of 13.34% after 5 years. The COVID-19 Pandemic followed a similar trajectory when on March 16, 2020, the market declined by 11.98% in a single day. This was followed by the market recovering to the March 13, 2020 level just 19 days later, recording a return of 66.07% after 1 year, and an annualized return of 18.77% after 5 years.
Am I saying the S&P 500 will reach its previous highs in 15-19 days? No, I don’t know how long the market will remain volatile or down. What we do know is that the market will have its ups and its downs, but it has historically always risen to new highs after a market downturn. Staying engaged in the market and not allowing our emotions to take over to try to time the market can be stressful, but it is also the reason you as an investor will be rewarded when the market does turn around. After the market dropped 10.5% in 2 days on April 3-4, 2025, it gained 9.5% in a single day on April 9, 2025. This was the third largest one-day return in 30 years. Investors that became too nervous and tried to time the market probably missed out on at least part of that upward swing. I encourage you to try to tune out the noise of the media. If you have any specific questions about what is currently going on, please reach out to us so we can help!
Disclosure: Asset returns are approximate and based on the date of writing. Past performance is not indicative of future results. Readers should not take this article as advice but general information. Reach out to your advisor for specific advice for your situation.