This chart is probably one of those that any investor should look at from time to time. In fact, we saw it recently in an article. It compares the return of the S&P 500 at the end of each year with the maximum drawdown suffered at some point during that same year. And the two things can be very different. We remembered this very recently in this article. But I prefer to sound repetitive rather than not reminding people of this fact enough.
Historical behavior and the reality of S&P 500 drops
Between 1980 and 2025, the S&P 500 finished in positive territory in 38 out of 46 years, approximately 83% of the time. However, all of those years experienced some level of decline. Furthermore, the average intra-year maximum drawdown hovers around 14%.
In other words, we can have a perfectly good year while navigating a correction along the way that, when experienced in real time, feels like the beginning of the Apocalypse.
Recent examples: 2025, 2026 and the severity of 2020
2025 and 2026 are recent and clear examples. At some point during the year, the S&P fell as much as 19% from its highs. Anyone looking solely at that moment might have thought the year was lost. It finished with a return of 17.9%.
In 2020, something even wilder happened. The pandemic caused a maximum drop of 34%. We are not talking about pleasant volatility or four complicated sessions. One-third of market value temporarily vanished. Well, the year ended with an 18.4% gain. And the following year added +28.7%. Imagine pulling out at a -20% loss; you’d be pulling your hair out.
Volatility is part of investing
That doesn’t always happen, of course. 2008 or the more recent 2022 remind us of that. But those episodes are much less frequent than a recovery within the same year. Regardless, in the 13 years following 2008, with the exception of a -4.4% dip in 2018, every single year posted positive returns, practically all with double-digit returns—some of them widely surpassing +20% or +30%.
The table I am showing you now takes the idea even further. It compiles S&P 500 declining sessions going back to 1928. And there is one common feature across a hundred years of history: every year has bad days.
In 2026, there are already 20 sessions with daily drops of at least around 1%. And yet, the S&P 500 is up about 14% for the year.
Market history changes every year, but negative days are always there. And good results are too. Waiting to invest until volatility disappears is equivalent to waiting for something that will probably never arrive. Volatility is not an accident or something you should wait to disappear. It is part of investing.
Source: Yahoo Finanzas
