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Does This Market Have Staying Power?

Does This Market Have Staying Power?

Stocks escaped the bear’s grip. What comes next

Investors cheered last week as the S&P 500 broke free of the bear market that had taken the index down more than 25%.

With the added gains of the past few days, the S&P 500 is now up 21.3% from its recent low point last October (although it’s still 9.5% off the all-time high it hit in January 2022.)

The big question on investors’ minds, of course, is: What happens next? While there’s no guarantee, history tells us that the current market may have some wind at its back.

For example, we identified the specific instances when the S&P 500 rallied by 20% following a drawdown of 20% or more—as it did last week—going back to 1928. The index’s average return over the next six months was 7% in those cases. That’s significantly higher than the overall average rolling six-month return of just 2.9% (see the chart).

Source: Bloomberg, as of 06/12/23

What’s more, in most cases, the index was higher six months after the initial 20% rally. 

These findings, which suggest the possibility of further gains from here, help support the case for holding equities rather than moving to cash—as do recent strong economic and jobs data that have given investors confidence. 

From a goals-based investment perspective, we believe the growth potential offered by equities remains attractive to investors at all stages—from those seeking to build wealth for the future to those looking to ensure their savings last for the duration of their retirements (and beyond) while meeting their spending goals. As always, our flexible, dynamic investment process will focus on identifying opportunities while mitigating those areas of the market with unattractive risk-reward characteristics.


This commentary is written by Horizon Investments’ asset management team.

Past performance is not indicative of future results.

The S&P 500 Index tracks the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is not possible to invest directly in an index.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.

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Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation.

This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.

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