It Happened Again

Earlier in 2025, the S&P 500 was nearly 20% off its highs, bottoming in early April around what many started calling the “Liberation Day” lows. 

And then… everything changed.

From those April lows, the market didn’t just recover, it surged. Stocks took off like a rocket ship, climbing close to 40% from the bottom through year end. By the time the calendar flipped to 2026, the S&P 500 finished 2025 up almost 18% for the year.

So, let’s pause and appreciate how strange, and important, that is.

The market experienced an intrayear drawdown of nearly 19%, yet still delivered a double-digit gain for the full year. A painful decline at the time and a strong finish all in the same 12 months.

One of the most fascinating things about markets is that this kind of behavior isn’t unusual at all. In fact, it’s completely normal.

We’ve seen this movie before. Variations of it played out in 2020 and again in 2023. And this isn’t just a quirk of the 2020s.

Since 1990, there have been 36 calendar years. In 21 of those years, the market suffered a peak-to-trough decline of 10% or more during the year. Out of those 21 volatile years, only 7 actually finished with a loss. The other 14 ended the year higher.

Even more interesting? Eleven of those 14 positive years delivered double-digit gains.

Put differently, about 40% of the years since 1990 that experienced a double-digit drawdown still finished the year up 10% or more.

That’s the paradox of investing. The stock market has an incredible ability to deliver strong long-term returns and gut-wrenching volatility at the same time. As I wrote the article “Volatility is the Price of Admission” in February of 2025 talking about the same thing before the market pulled back in April, pure coincidence.

Of course, it doesn’t always resolve so neatly. There are years like 2000, 2001, 2002, 2008, and 2022 when markets fell sharply and stayed sideways or slowly crawled their way back up.

That’s what makes investing in the short term so difficult is markets recover faster than expected and don’t give the worried investor time to react. Other times, patience is required longer than we’d like. The problem is that no one knows which one is best in the short run.

“Wealth isn’t primarily determined by investment performance, but by investor behavior.”-Nick Murray

Earning the long-term rewards of investing means enduring both short-term and long-term volatility. There’s no way around that part of the journey, but history shows that those who stay the course are the ones who are ultimately rewarded.

With that, I hope you are off to a great start for 2026 and look forward to another great year and memories ahead!

Garden Harvest

Cauliflower Plant

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