Time vs. Timing: 60 Years of S&P 500 Bull and Bear Market Insights

As of April 8, 2025, the $S&P 500(.SPX)$   has retreated 17% from its historical peak, sparking "bear market alerts" across Wall Street and social media platforms. However, a look at the S&P 500's 60-year trend reveals an counterintuitive truth: the index has experienced declines on 93% of trading days. Missing just the best 1% of weeks can drastically impact investment returns, according to statistics from Bank of Singapore. This article uses data to break down the underlying logic of bull and bear cycles, unveiling the wisdom of "Time in the Market."

Market Pullbacks Are More Common Than You Think

According to LPL Research, since 1950, the S&P 500 has experienced a pullback of at least 5% about 3.4 times a year, a correction of over 10% about 1.1 times a year, and significant adjustments of over 15% about 0.5 times a year. Nearly every year, the market dips for various reasons—whether due to war, tech bubbles, or pandemics—but it always recovers.

Fast Recovery from Non-Recession Bear Markets

A market decline of 20% lasting over two months is typically classified as a bear market. However, recovery speeds vary depending on the economic backdrop. For instance, in 1966, the market fell by more than 22% mainly due to Federal Reserve tightening and a credit crunch. Nevertheless, after a swift rate cut by the Fed, the economy did not enter a recession and the market quickly rebounded.

In contrast, the recession-type bear market of 1973, compounded by the oil crisis and Federal Reserve tightening, saw the market retreat by over 48%, taking over six years to return to its previous highs.

Market Predictability Is a Challenge, Even for Top Institutions

WisdomTree reviewed predictions from 16 different forecasts made by banks and asset managers at the end of 2022. It's important to note that the S&P 500 saw a significant gain of 24.2% throughout 2023. The analysis of these forecasts revealed significant discrepancies:

There was a wide 21% gap between the most pessimistic and the most optimistic forecasts, covering a broad range of predictions. Despite this, not a single expert came close to accurately forecasting the outcome. In fact, some predictions were off by as much as 28%.

Why Time in the Market Beats Timing the Market

Bank of Singapore uses a series of data to illustrate: if an investor had invested $100 in the S&P 500 index in 1970 and held it to date, this investment would have grown to $30,660. However, missing just the top 1% of trading weeks would have reduced the final return to $3,270—a difference of nine times.

It is crucial to note that the market's best performances often occur during periods of extreme volatility. Historically, the largest stock market gains usually happen right after the sharpest declines.

"As those who try to avoid downturns often miss out on the quickest rebounds," points out Mike Wilson, Chief Strategist at Morgan Stanley, "it's like staying indoors forever to avoid the rain, only to miss out on the rainbow."

By deliberately shifting focus from short-term metrics, such as daily, weekly, or monthly returns, to a longer time horizon, including annual or multi-year evaluations, the perspective moves away from short-term fluctuations to long-term growth. This strategic shift underscores the importance of time spent in the market rather than attempting to time the market.

Bank of Singapore also advises investors to maintain a long-term perspective and avoid panic selling during market downturns, ensuring full benefits from market recoveries and reinforcing the principle that staying invested is the most reliable way to build wealth.

In times of market panic and looming recession fears, it's worthwhile to revisit the wisdom of Benjamin Graham: "In the short run, the market is a voting machine but in the long run, it is a weighing machine." 

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