The SPX fell more than 10% over last week's final two sessions
The tariff-fueled stock selloff reached a couple of key milestones in recent days. On Monday, the S&P 500 Index (SPX) briefly entered bear market territory on an intraday basis, falling 20% from its prior all-time high -- a commonly used threshold for a bear market.
Another notable move: The SPX dropped more than 10% over the final two trading days of last week -- a rare and significant decline. In this week’s article, I’ll examine how the index has historically performed following these events.
Bear Market Territory
Since 1929, there have been 15 previous bear market pullbacks of 20% or more on an intraday basis. The table below lists the dates when the index first touched bear market territory and other information on how quickly it declined, how big the loss eventually got, and how long it took to get back to the previous highs.
The SPX currently sits just less than 20% off its most recent all-time high. You can see in the table below how big the pullbacks eventually got, and how many days after hitting a 20% loss it took to reach the trough.
Looking at the median levels, bear markets have bottomed out at around a 29% loss, which happened about 40 calendar days (roughly five to six weeks) after the 20% loss. Quick turnarounds aren’t uncommon, however, with four of the pullbacks in the table below happening within just a day or two of the ultimate bottom.
The speed at which the market recently went from an all-time high to a 20% loss was relatively fast. It took 47 days, which is the third fastest decline in the table. This is good news, as hasty declines have typically led to big gains.
Of the 15 bear market declines, six took less than 100 days. The SPX was phenomenal after those declines, except for the 1929 crash at the beginning of the Great Depression. Despite that data point, the SPX averaged a 19% gain over the next six months after these declines, and a 23% return over the next 12 months.
Excluding that Great Depression decline, it averaged a 23% and 33% return over the next six months and year respectively, with all five returns positive. After the other declines, the index was barely above breakeven six months and a year out.
10% in Two Days
The end of last week was only the sixth time since 1950 the SPX shed double digits over a two-day stretch. The last time this occurred was in March of 2020, at the beginning of the Covid-19 pandemic. Other than that, there were a couple of occurrences during the financial collapse in 2008 and Black Monday (October 19th, 1987) when the SPX fell over 20% in a single day.
Once again, these very sharp declines were often followed by very sharp increases. The SPX averaged a return of almost 16% over the next six months after these two-day 10% losses.
