Recent stock market losses are not as bad as they may seem
Last week saw the S&P 500 have its worst week since September. The index fell 3.1% and some equity investors are wondering if it’s time to head for the exits.
Not so fast. We believe the equity market’s recent losses are essentially a blip on the radar screen.
To see why, consider the S&P 500’s drawdown—the index’s decline from its most recent peak, which was the all-time closing high just two weeks ago on February 19th. The current drawdown is just 9.5% (see the chart). That’s far less than the many drawdowns of 15% or more that investors have confronted over the past five years or so, and in line with the drawdown we saw last August. Stocks ultimately recovered and pushed higher after every one of those larger drawdowns—resulting in a 94% total return for the S&P 500 since the start of 2020.
S&P 500 Drawdowns (Peak to Trough), 2020 – Today
Source: Bloomberg, calculations by Horizon Investments, data as of 03/10/2025. It is not possible to invest directly in an index.
So while this current drawdown is the biggest we’ve seen since last August, it’s not particularly noteworthy in the big picture. In our opinion, it’s also not a clear signal to shun stocks. Either way, pullbacks never feel good but they’re a normal part of investing that often removes some of the market’s biggest excesses—and, in doing so, can potentially set the stage for future gains.
Regardless of where stocks go from here, we think the message is clear: Don’t let a bad week or two throw your goals-based investment strategy off course. Instead, consider ways to mitigate losses while sticking with your plan.
