Bull markets can make investors forget that volatility and drawdowns are a normal part of investing. Historically, recessions have led to the most severe market declines, with the average S&P 500 drawdown reaching -30%; far beyond what most investors are comfortable experiencing in a single year. The two most recent major drawdowns occurred in 2020 (-33.92%) and 2022 (-25.43%), both smaller than the declines seen during the 2001 bear market (-49%) and the 2008 financial crisis (-56%). With markets near highs, now is an important time for investors to revisit their goals, assess their risk tolerance, and ensure their portfolios are positioned to withstand future volatility.
Source: Bloomberg, First Trust
This graph was produced by Lucas Juery, CFA, CFPⓇ and is not intended to provide financial advice.
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