As of now, the S&P 500 has avoided officially entering a bear market. There is plenty of detailed analysis of the current state of the market out there; in fact, I’ve been doing my own. But let’s put aside the nitty-gritty of the details for a second. Today, I want to walk you through 15 big-picture things all investors should know.
Stocks Can Go Up on Bad News
A lot of bad things have happened since 1900, yet the Dow has continued to move back to new highs after every single one of them. The truth is a lot of good things have happened throughout history, too, but we usually don’t hear as much about those. As bad as the reaction has been to “Liberation Day,” we don’t think this will be any different than the other bouts of bad news, as some day in the future new highs will very likely happen.
Bear Markets Happen, Even Outside of Recessions
The S&P 500 is down more than 17% from the February 19 peak, so we are one bad day away from moving into a new bear market. Does this mean a recession is right around the corner? As of now, we think we can avoid a recession this year, but the odds have unquestionably jumped the past few weeks.
Still, looking at the past 18 bear (or near bear) markets, we find that nine took place in a recession and nine didn’t, with the average bear down nearly 30% over those 18 times. The times a recession was avoided, stocks fell about 24%, compared with bears in a recession down nearly 35%. (But keep in mind that doesn’t include the times a recession didn’t see a bear market, which also happens.)
If we aren’t falling into a recession, then the odds favor that this current weakness will be fairly contained near here.
Big Moves Are Normal
Looking at annual returns, when the S&P is positive, it is up 19.0% on average. When it is lower, it is down an average of nearly 14% for the year. Those are some big moves. Think about that again. When stocks finish higher on the year, they are up nearly 20% on average—likely way more than most investors expected. The flipside is when things are in the red, a decline of nearly 14% is perfectly normal. So larger down years might not happen as often, but they indeed can happen.
Average Isn’t So Average
Along the same lines as above, the average year for the S&P 500 gains 9.5%, but a gain around that average is extremely rare. In fact, only four times going back 75 years have stocks finished 8–10%. Just know that larger moves are quite common—whether those moves are up or down.
Corrections Are Normal
The current 17.6% correction sure feels like a lot, especially given that we didn’t have a 10% correction all of last year. But it turns out this is more common than you might think. Since 1980, we found the average peak-to-trough correction per year is 14.0%. Yes, this year has a long way to go, and things could get worse. But don’t forget that things could also get better.
Another Bear Now Would Be a Record
If we did enter into another bear market, it would be the third bear market in the past five years. That would be the fastest we’ve ever seen three bear markets start, topping the just under seven years we saw for three bear markets starting from February 1966 to January 1973.
Volatility Is the Toll We Pay to Invest
No, this year hasn’t been fun so far, but we like to say that volatility is the toll we pay to invest. Every single year will have some bad days and some scary headlines. In fact, on average, you’ll see a 10% correction once a year—with a bear market every three and a half years. If you want the longer-term gains that stocks historically provide, you need to be willing to deal with some of the volatility.
February Peaks Are Rare
Can stocks really get back to new highs before this year is over? We get it, that would take a heck of a move, but the odds aren’t perhaps as slim as many think. Should we get some good news on the trade front and the economy remains resilient, it could happen. Then toss in the fact that only twice going back 75 years has stock peaked in February, and maybe we could see a new high later this year.
There Were Warning Signs
Could the Eagles winning the Super Bowl have been a bad sign? Each time the City of Brotherly Love has won a Super Bowl or World Series, bad things have happened. Sure enough, ever since the Eagles won in February, thing have been pretty bad. (Full disclosure: Don’t invest based on the Super Bowl, but this is interesting!)
Rough Start for Trump 2.0
Speaking of bad returns, things haven’t done nearly as well in President Trump’s second term, or as I’ll call it Trump 2.0. The S&P 500 is down 15.6% since he took office. Looking at the past 33 presidential terms, this is the fifth worst start out of all of them. Yes, there is plenty of time left for this to improve, but still, this isn’t a good start.
VIX 50 Is a Good Sign
The VIX soared to above 60 Monday morning, hitting levels that have historically marked major bottoms for stocks. We’ll keep this simple, but when the VIX hits 50 for the first time in a month, it has probably been preceded by poor performance driven by panic, likely suggesting better times are coming. In fact, the S&P 500 has gained more than 20% on average a year later after the VIX spikes above 50.
Adding to the pure washout levels of sentiment, the CNN Fear & Greed Index hit a level of three yesterday morning—about as low as it can go—suggesting many of the sellers have likely already sold.
Valuations Matter, but Maybe Not as Much as You Think
We absolutely pay attention to valuations, and the high valuations on technology is one of the reasons we didn’t come into 2025 overweight in this group like so many others. Still, you might be surprised to find out there is virtually no correlation between price-to-earnings (P/E) multiples and future stock performance over short time periods. We found S&P 500 trailing P/E multiples and one-year future returns have a correlation coefficient of virtually 0, suggesting there is no correlation between the two.
Time in the Market Is Important
Our advantage as investors is time. We can be less concerned with day-to-day volatility when we take a longer-term approach to things. Doing this shows that it isn’t about timing the market, but about time in the market.
Yes, you’ve likely seen losses in your portfolio in the past seven weeks. But if you have a long enough time horizon and you’re invested in line with your risk tolerance, you were already prepared to weather the storm for the potential of longer-term gains.
As illustrated below, over the long run, you’ll likely make money investing. Understanding this is the big advantage you have over the crowd.
Missing the 10 Best Days Can Really Hurt
If you panic and sell at the lows, then you’ll miss out on the rebound. We’ve done the work, and we found that the worst days of the year happen right around the best days of the year. So if you can’t take the bad days we’ve seen lately and sell, you’ll inevitably miss the upcoming best days on the rebound, which is very difficult to time.
Below, we show what happens if you miss the 10 best days of the year. The bottom line is that since 2000, the average year has gained 9.8%. But that drops to -12.5% if you miss the 10 best days each year.
Double-Digit Down Years Are Rare
The S&P 500 is down 13.9% on the year, but does that mean the year will close down from here? As of now, we think the odds greatly favor stocks to finish the year higher than where they are now—likely a good deal higher with any good news.
In fact, for the year to lose 10%, it usually takes some really bad news. As you can see in the table below, double-digit yearly declines nearly always have a major catalyst and we’ve only seen four of them since the turn of the century. Could tariffs be the driver for this to happen this year? Maybe, but only time can tell. For now, we feel a double-digit decline in 2025 will likely be a low-probability event.
And there they are—the 15 things you need to know as you weather the current market environment. Thanks for looking to us for guidance in this challenging time. If you have specific questions regarding your portfolio, don’t hesitate to reach out to your financial advisor.
Ryan Detrick is a non-registered affiliate of Cetera Advisor Networks, LLC.
The S&P 500 is an index of 505 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The Dow Jones Industrial Average is a price-weighted average of 30 U.S. blue-chip stocks traded on the New York Stock Exchange and NASDAQ. The index covers all industries except transportation, real estate and utilities.
The Chicago Board Options Exchange (CBOE) Volatility Index, commonly known by its ticker symbol VIX, is a measure of the stock market’s expectation of volatility implied by S&P 500 index options. The index is calculated and published by the CBOE based on market prices of call and put options on the S&P 500 for the next monthly expiration, and the second month expiration of the options. The VIX is a measure of market perceived volatility in either direction, and represents the expected range of movement in the S&P 500 index over the next year.
