May 14, 2025
Historical parallels suggest that financial markets can rebound strongly from severe downturns, though not all recoveries evolve into sustained bull markets.
The 2025 Market Recovery: A Rare but Resilient Phenomenon
After plunging more than 15% from January 1 to April 8, the S&P 500 has recouped its losses and turned positive for the year. This is a historically significant event-since 1945, there have only been nine instances where the index has rebounded from an intra-year decline of at least 10% to finish the year in the black. Notably, 2025 marks the fastest recovery from a 15% year-to-date drop since 1982, underscoring the market’s capacity to rebound swiftly in the face of adversity.
This is only the fifth time in my investing career that the S&P 500 has erased a year-to-date loss of 15% or more before year-end, with the most recent comparable recovery occurring in 2020 during the COVID-19 crisis. Other notable years with similar rebounds include:
- 1970: Economic slowdown countered by monetary easing.
- 1982: Inflation easing and a shift in Federal Reserve policy.
- 2009: Post-financial crisis stimulus.
- 2020: Pandemic-driven crash followed by unprecedented fiscal and monetary support.
These episodes and the 2025 recovery highlight the market’s ability to rebound from major shocks, including the 2008 financial crisis, the early 2000s dot-com bust, and the COVID-19 crash.
This is only the fifth time in my investing career that the S&P 500 has erased a year-to-date loss of 15% or more before year-end, with the most recent comparable recovery occurring in 2020 during the COVID-19 crisis. Other notable years with similar rebounds include:
- 1970: Economic slowdown countered by monetary easing.
- 1982: Inflation easing and a shift in Federal Reserve policy.
- 2009: Post-financial crisis stimulus.
- 2020: Pandemic-driven crash followed by unprecedented fiscal and monetary support.
Drivers of Past Recoveries
Distinct catalysts fueled each rebound:
- 1970: I was an investor in 1969, when commission-based volumes were so thin, my broker quit his job. However, monetary easing and fiscal stimulus countered economic stagnation and rising unemployment in 1970.
- 1982: I joined the securities industry on January 2, 1981, during a period of high inflation, 20% interest rates, and restrictive Fed policy. However, that gave way to rate cuts, sparking a strong rally.
- 2009: I started my portfolio management company in December 2007, as the global financial system was undergoing a meltdown. Government bailouts and stimulus packages helped stabilize markets after the financial crisis.
- 2020: I closed my portfolio management business in March 2020 after COVID-19 surfaced and took the remaining accounts to a US-based firm. At the time, a recession hit and the market crashed. However, aggressive monetary policy, fiscal stimulus, and rapid vaccine development drove a swift recovery.
Did the Rebound Always Lead to a Bull Market?
Not all recoveries transitioned into prolonged bull markets:
- 1982, 2009, and 2020 each led to extended bull runs.
- 1970, however, saw a shorter-lived rebound before further volatility.
- 2025? So many banks and manufacturing companies have pulled forward revenue and earnings guidance due to uncertainty in international trade and foreign exchange. I’m doubtful the environment is sufficiently stable to project widespread corporate growth and a risk-on investment environment. But Mr. Market will decide.
Conclusion: Resilience and a Long-Term Perspective
Historical precedents demonstrate the market’s remarkable ability to recover from steep declines, though outcomes vary based on the economic and policy landscape. While past performance cannot guarantee future results, history provides valuable context for navigating today’s turbulent environment.
Maintaining a long-term perspective remains essential. The Cara 100 Global High-Quality Companies portfolio, built on rigorous research and diversified by country, sector, and growth versus value, meets my needs for resilience and sustainability in an uncertain world. This approach reinforces the importance of patience, discipline, and adaptability, the qualities that have consistently underpinned successful investing through cycles of volatility and recovery.