Reading:The S&P 500 Is on Track to Do Something That’s Happened Only 4 Times in 85 Years — and It Offers a Very Clear Message of What’s Next for Stocks
For over a century, the stock market has been the most wealthy for investors. Real estate, the Treasury Department, and various commodities such as gold, silver and oil are all rising at nominal value, but nothing is particularly comparable to annual stock returns in the very long term.
However, Volatility, the creator of this top-notch wealth, has an admission price.
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It’s been iconic for the past two months Dow Jones Industrial Average(djindices: ^dji) And a wide range of bases S&P 500(snpindex: ^gspc) The double digit percentage fell and fell into the correction area. Meanwhile, innovation-driven Nasdaq Composite(Nasdaqindex: ^ixix) Officially soaked Bear Marketas of the closing bell on April 8th.
Some revisions in the broader market are orderly (for example, the market near the Bear of the S&P 500 in the fourth quarter of 2018), others have taken an elevator down approach. The Dow, S&P 500 and Nasdaq Composite have been seen in trading activities over the past three weeks Record some of the biggest single session points and percentage profits and declines In each history.
Image source: Getty Images.
The volatility of this feature is the benchmark S&P 500 to do what has only happened four times since 1940. The best thing about this unusual, sometimes scary event is to send a very clear message to investors of what comes next after the stock.
Before unearthing Ultra-Rare events, the S&P 500 had the opportunity to replicate in 2025, allowing you to understand the catalyst that spurred this historic volatility match on Wall Street. It effectively sums up to three sources of fear and uncertainty for investors.
First, on April 2nd, President Donald Trump’s “Liberation Day” tariffs will be announced. Trump has implemented a drastic 10% global tariff and set higher mutual tariff rates on dozens of countries that have implemented historically unfavourable trade imbalances with the United States
President Trump has placed a 90-day suspension on these higher mutual tariffs on all countries other than China, but the actual risks of trade relations between China and our allies are exacerbating in the near future. This could negatively affect the demand for US goods across our borders.
The President and his administration have not done a particularly good job of distinguishing between production and input tariffs. The former is an obligation to complete products, while the latter is an additional tax on those used to manufacture finished products in the United States, which could threaten to increase inflation and reduce price competitiveness with those importing.
Second, the historic priceability of stock promotes Wall Street volatility. In December 2024, the S&P 500’s Schiller Price-to-Earning (P/E) ratio (also known as the cycle-adjusted P/E ratio, or CAPE ratio) reached almost a multiple of 39 for the current Bull Market.
Over the past 154 years, there have only been half a dozen instances where the S&P 500 Schiller P/E exceeded 30 and held that level for at least two months. Following five previous outbreaks, at least one of Wall Street’s major stock indexes has lost 20% (or more) of its value.
In other words, Schiller’s P/E reveals that the stock market is running at a time when the valuation is over-expanded.
The third factor in inciting whiplash on Wall Street is the Treasury bond yields are rising rapidly. One of the fastest moves in long-term Treasury bond yields in decades means concerns about inflation, and points to potentially costly for consumers and businesses.
Image source: Getty Images.
Let’s get a clearer understanding of why stocks have been rocking wildly over the past few weeks and head back to the S&P 500 attempt to make history in 2025.
Based on data collected by Charlie Billelo, Chief Market Strategist at Creative Planning, the 2.2% decline registered by the S&P 500 on April 16 saw an index drop of at least 1% during one session, marking the 18th anniversary of the year. In the context, the average number of 1% or more reductions over a day in a given year over the past 97 years (1928-2024) is 29.
During the Great Repression and in the years that followed, a decline of over 1% was a very common occurrence, but in the past 85 years, large clusters of big down days have been somewhat rare. Between 1940 and 2024, it was only four years that the total total of major down days (1% or more) exceeded 56.
1974: 67 massive down days
2002:72 massive down days
2008:75 massive down days
2022: 63 major down days
These periods coincided with the OPEC oil embargo of the mid-1970s, the tail of the bubble explosion at the dot com, the height of the Great Recession, and the 2022 Bear Market.
Until 106 calendar days (i.e. through the closing bell on April 16th), the S&P 500 endured every 18 major down days, or 5.89 calendar days. If this ratio is held throughout 2025, the S&P 500 is expected to fall by more than 1% during the 62 trading days this year. This level of downside volatility is extremely rare in benchmark indexes; Huge Silver lining.
Each of these rare rising downside volatility represents a surefire purchase opportunity that brilliantly rewards optimists.
Since 1974, including dividends, the S&P 500 rose 31.6% after one year, 38.7% after three years, and 57.4% after five years.
Since 2002, including dividends, the S&P 500 rose 28.7% after one year, 49.7% after three years, and 82.9% after five years.
Since 2008, including dividends, the S&P 500 has increased by 26.5% at 48.6% at 1, 3 years later, and 128.2% at 5 years later.
Since 2022, the S&P 500, including dividends, won 26.3% a year later.
On average, the total revenue for the S&P 500 was 28.3% for the year after a period of loud volatility. More importantly, the benchmark index rose 100% on the 1, 3 and 5 year marks (where applicable).
Based solely on what this historical data tells us, the short-lived period of the S&P 500’s massive downs day represents a sure opportunity for optimistic long-term investors to make money.
Consider this before purchasing stock at the S&P 500 Index.
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