While the US stock market has been on such a long bull run with only brief interruptions, it’s become easy to forget that stocks actually do not only go up. After back-to-back years of blowout performance in 2023 and 2024, the consensus among Wall Street firms was for more of the same in 2025(2). Right out of the gate, their predictions looked astute; after opening the year at 5,868 the S&P 500 raced out to a peak of 6,144 on February 19th, a fresh all-time high(2).
And then, something changed. Stocks have since entered correction territory in the month to follow. There is no official definition of what constitutes a market correction, but most generally agree that it is when a major stock index declines by 10-15%. As of this writing, the S&P 500 has shed 10.1%, the high-flying NASDAQ has lost 13.7%, and the small company Russell 2000 is down 14%(1). Fortunately for our clients at Cherry Tree Wealth, sticking to our defined strategy has been paying off. Our client portfolios are typically down far less than these indices year-to-date, or even slightly positive.
Volatility is a normal part of investing and an occasional correction can be a healthy thing for the markets. Some selling can serve to keep valuations at reasonable levels and wipe out overly-leveraged speculators, which are both good things for long term investors and expected future returns.
Research from Dimensional summarized in the above graph shows that even positive years for the stock market are not without intra-year volatility. From 1979 to 2020, the average intra-year decline in the US stock market was 14%. Over a third of the time, there was a drop of more than 15%, and yet market returns were positive in 34 of the 41 years(3).
For those periods that do not see positive performance, there is some comfort in the knowledge that they are often short-lived. According to Schwab’s data from 1961 to 2025, the average bear market has lasted 14 months and featured an average cumulative return of -36% for the S&P. That may not be anyone’s idea of a good time, but it pales in comparison to the average bull market, which has lasted 63 months and provided an average cumulative return of 182%(4).
Anxiety is obviously running high for a lot of people during these periods of turbulence, which can make it very tempting to sell and avoid the pain of additional losses. This unfortunately is one of the biggest and most common mistakes we see people make. History shows that the market tends to rebound very quickly. By the time it is reported in the news that the market is rebounding, those sitting on the sidelines have likely already missed most of the rally.
Big return days are unpredictable, and they are costly to miss. According to more research from Dimensional, $1,000 invested in the S&P 500 from 1990 through 2020 would have grown to $20,451 if you never touched it. If you missed the single best day of performance, your final value would drop to $18,329. If you missed the best five days, you would’ve only finished with $12,917(5). This is why we do not try to time swings in the market. Maybe we could get lucky, but we believe it is more likely to be destructive than profitable.
So, what can you do in response to wild swings in the stock market?
Times like these can present a wonderful opportunity to evaluate your investment strategy. Have you been trying too hard to chase trends? Is your portfolio sufficiently diversified across sizes, industries, and countries? Have your time horizon or goals changed? Are you over-invested in large technology stocks? Are you taking advantage of all available options to reduce your taxes?
Patience and sticking to a sound strategy are tantamount to success in investing, and working with an advisor can help you design a strategy that will give you peace of mind no matter what the S&P 500 is doing. If you find yourself overly anxious about market volatility, it may be time to review and revise your strategy.
Sources
(1): All index value data obtained from Google Finance
(3): https://www.dimensional.com/ca-en/insights/recent-market-volatility
(4): https://www.schwab.com/learn/story/market-correction-what-does-it-mean
About the Author: Eric Annett
Eric is an Investment Advisor Associate for our Wealth Management Team. He has an analytical skill set and loves to take complex subject matter and make it easier for people to understand so financial matters don’t get in the way of living their best life. Prior to joining Cherry Tree, Eric spent seven years in a variety of roles within MassMutual, most recently with one of MML’s elite advisor teams as an Investment Specialist, where his primary responsibilities included investment research, portfolio management, and trading.
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.