Since 1926 there have been 20 market drops of 15% or more. Our strategic partners at Russell Investments created a chart to illustrate not only the cumulative market losses but also the subsequent gains. It is interesting to note that every market drop has been followed by gains and the average 12-month return is 49%.
Also of note is that while market drops of 15% or more frequently lead to recessions, they don’t always. In fact, of these 20 drops, 5 of the last 12 did not result in recession.
The following graphic provides more detail:
Source: Russell Investments
S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. Investors cannot invest directly in an index. Past performance is no guarantee of future results.