History has shown that some of the worst
short-term losses in the stock market were often
followed by rebounds. Take a look at the numbers.
The upside of downturns
- Since 1950, the U.S. stock market, as measured
by the S&P 500®,
has declined more than 13% over a
three-consecutive-calendar-month period on 10
different occasions.*
- In eight of these 10 instances, the stock
market rebounded by more than 20% over the
following year.
- In seven of the 10 sell-offs, the subsequent
rally was large enough to recover more than all
of the market's previous losses.
Elevated stock market volatility is not
necessarily synonymous with declines
- As history demonstrates, some of the worst
short-term losses were followed by substantial
rebounds.
- These snap-back rallies were often as abrupt
and difficult to time as the original sell-off.
Flee to cash or stay invested?
- In many cases, investors would have been
better served by remaining fully invested during
the entire period -- enduring near-term pain but
not missing out on the subsequent rebound.
The Market Analysis, Research and
Education (MARE) group, a unit of Fidelity
Management & Research Co. (FMRCo.), provides
timely investment-oriented content on developments
in the financial markets.
