Last Updated on April 9, 2025 by Chin Yi Xuan
The stock market has been WILD over the past few days!
As of this writing (9/4/2025), the US stock market (S&P500) has dropped by 19% from its high in February 2025.
The question is, how much more can the stock market drop?
Let’s find out:
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Table of Contents
Q1: How much can the US stock market (S&P500) drop in a year?
Short Answer: Historically (1980 – 2024), between 3% to 49%, with an average of 14.1%.
The red figures in the following photo show how much the S&P500 declined every year for the past 45 years (1980 – 2024).
This shows us that…
- A 10+% market drop in a year is very normal (Occurred 16 times in the past 45 years)
- 20 – 30% declines are also more common than you think (Happened 8 times in the past 45 years)
Q2: Where are we now?
Currently, the S&P500 has declined by about 19% from its highest point in February 2025:
A bear market is defined by a >20% drop from its high.
Given the escalating uncertainties, I’d not be surprised to see the S&P500 enter a bear market soon.
Q3: The challenge of buying the dip in a S&P500 bear market:
Despite the past crises, the US stock market tends to go up in the long run:
This makes buying the dip as the stock market falls attractive, but it is not without its challenges.
The tricky part here is:
- We do not know when exactly the bear market will hit bottom. It could be as short as 1 month, or even multiple years. As such, we need to endure the road to the bottom and along with its slow recovery.
- We need to have the mental conviction to stick to our investment as a long-term investor throughout the noise and fear during the bear market.
Q4: How long does the S&P500 take to bottom & recover from a bear market? (1980 – 2024)
If the S&P500 does go into a bear market in 2025, it is helpful to know the info below:
A quick glance at the bear markets from 1980 to 2024 shows that:
- The time taken for a bear market to bottom can range from 1 month (Covid-19 crash) to 30 months (Dot-com bubble).
- The time taken for a bear market to recover can range from 6 months (Covid-19 crash) to 7 years (Dot-com bubble).
The table above teaches us a few things:
- It is very difficult to predict the bottom. Ranging from 1 month to 30 months, it could be anything.
- All bottoms are reached FASTER than they took to recover. It shows that patience is required on the road to recovery – it will test your conviction!
Either way, you can get a better visual for how stocks ‘bottom fast and recover slow’ from the chart below. It highlights every 20%+ decline (bear market) in S&P500 (in orange) and its subsequent recovery (in green):
Q5a: What not to do during a bear market?
4 things, namely:
- Don’t panic-sell your long-term investments.
- Never use the money you need for your expenses and commitments to invest.
- Never borrow money to buy the dip!
- Don’t give in to Fear Of Missing Out (FOMO) and invest in things you don’t understand
Q5b: What to do during a bear market?
- Follow your investment plans. If Dollar Cost Average (DCA) is your routine, stick to your plan.
- If you have extra money to invest during the dip, do it within your means. Understand that a dip and dip further.
- Make sure your emergency funds and savings are sufficient. In the past, some bear markets happened alongside a global recession (eg. Global Financial Crisis, Covid-19), which led to layoffs. You’ve got to prepare for this.
- Journal your feelings as you go through this bear market. Recording and acknowledging my emotions and sticking to my investment routine anyhow was my biggest learning and growth when I went through the 2022 bear market.
Verdict: There’s light at the end of every tunnel
The stock market tends to go up in the long run despite the volatility and crises.
While the stock market is and will continue to be bumpy, it is one of the best instruments that everyday people can access to grow their wealth.
Now that you’ve finished this post, I’m sure you are much more informed than your peers in investing.
Hope you find this insightful and thanks for reading!
Disclaimers:
None of the information contained herein constitutes a recommendation, promotion, offer, or solicitation of an offer to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Investment involves risks. Investors should obtain their own independent financial advice and understand the risks associated with investment products and services before making investment decisions.
Any discussion or mention of an stocks or ETF is not to be construed as a recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
