The S&P 500 has experienced a swift decline, falling at least 7.5% from an all-time high in three weeks or less for the 17th time since 1953. This rapid descent has been attributed largely to uncertainty surrounding President Donald Trump's tariff policies. At one point on Tuesday, the index was pulled 10% below its peak, marking an unusually fast drop.
Historically, the market has shown resilience following such sharp declines.
"If the last 16 occurrences have taught us anything, it's that the market at the very least attempted a bounce in the weeks and months after prior sharp pullbacks from record highs," – Bespoke
In past occurrences, the S&P 500 has, on average, been higher one week, month, three months, six months, and a year following declines of at least 7.5% from all-time highs. Notably, the market has rebounded more than 13% on average one year after such declines, with a success rate of being in the green 69% of the time.
The historical data provides a semblance of hope for investors, despite current market volatility. The market surged more than 43% over the next 12 months following a sharp pullback in 2020. However, it also saw a substantial tumble of another 12.8% after a drawdown in 2000.
"Every time is different, and the tariff hammer that seems to come out every time the market attempts to rally is making for a difficult market environment," – Bespoke
This sentiment highlights the unique nature of each market fluctuation and the challenges posed by external economic policies.
As market watchers analyze these patterns, they recognize the potential for a rebound, albeit with caution due to ongoing uncertainties. The S&P 500's historical resilience offers a degree of optimism, but investors remain wary of factors that could impact future performance.