Before Reacting to Recent Market Volatility, Look at These Three Long-Term Reality Checks
Recent market volatility and troubling headlines out of the Middle East can make investing feel more stressful and personal, especially as we get older and our financial decisions carry more weight. During times like these, perspective matters.
To help bring that perspective into focus, I want to share three recently updated and long-standing market history graphics from Dimensional Fund Advisors. Together, they offer a clear and reassuring view of how markets have behaved over time and why staying disciplined matters most. These resources are worth revisiting during future bouts of volatility and sharing with family or friends who may find them helpful.
Where to Start
Once you have developed your retirement blueprint and determined the investment rate of return you need to earn to outpace inflation and help protect your purchasing power, a big decision that is debated in many circles is what percentage of your portfolio you will allocate to the broad ownership of companies (stocks) vs. fixed-income investments (bonds and money markets).
Greater allocations to stocks have historically provided more growth and a better hedge against inflation, but also more volatility.
As we get older, the way we experience stock market volatility likely feels different than it once did. It can feel more personal. Headlines, like those on the Middle East conflict this week, feel louder, downturns feel more personal, and the temptation to “do something” can be strong.
History offers some helpful perspective. By looking at how markets have behaved over many decades, we can separate what feels unusual from what has actually been very normal—and use that understanding to make more confident financial decisions.
Three longstanding market history graphics from Dimensional Fund Advisors help put those emotions into perspective. When viewed together, they tell a consistent and reassuring story about how markets behave and how successful investors respond.
1. Most Years Are Positive but the Path Is Never Smooth
The first graphic, Distribution of US Market Returns, shows annual U.S. stock market returns over the last 100 years (1926 through 2025).
Two important observations stand out:
- Positive years have occurred 75% of the time, while negative years occurred 25% of the time.
- The extent to which returns were positive vs. negative: On three occasions, the market index had returns between -20% and -30%, while returns fell between +20% and +30% on twenty-four occasions (the most common occurrence).
This reinforces a key principle: volatility is normal, not a signal that something is “broken.” The market does not deliver steady, average returns year after year. Instead, long-term growth is built from a wide range of outcomes.
Trying to avoid the bad years often means missing the good ones because there is no reliable way to predict which is which.
2. Even “Good” Years Feel Bad Along the Way
The second graphic, US Market Intra-Year Gains and Declines, examines something investors rarely focus on: what happens within each year, not just the final result.
This chart compares calendar year returns with the largest intra-year declines and gains for each year. The long blue lines show how far up market returns were in a given year, while the long gray lines show how far down market returns were at some point during the year. The dark circle represents where the broad market index ended the year.
The key takeaway is striking: Even in years that finished positive, markets often experienced significant declines along the way with the average annual peak to trough drop of 14%.
In other words, market discomfort is not limited to bear markets. Temporary declines happen regularly, even when the year ultimately ends well. 2025 was a great example of this.
This helps explain why staying invested can feel emotionally difficult even during long-term success. The discomfort is not a sign of poor planning; it is the cost of participating in markets that reward patience over time.
3. Bear Markets Are Temporary; Recoveries Have Historically Been Powerful
The third graphic, A History of Market Ups and Downs, places bull and bear markets (declines of 20% or more) side by side using nearly a century of data from the S&P 500 Index.
There are two important takeaways:
- Bull markets have historically lasted longer and delivered far greater cumulative gains than the losses experienced during bear markets.
- Despite the way we likely felt and what was reported during each downturn, the duration of bear markets has been significantly shorter than bull markets.
Perhaps most importantly, this chart reminds us that recoveries often begin when uncertainty feels highest. Investors who exit during downturns may risk missing the early, and often strongest, phases of recovery.
The Common Thread: Volatility Is the Price of Long-Term Growth
Market volatility is not a flaw in the system. It is a feature of how the long-term returns you need to outpace inflation are earned.
Anchoring decisions in market history rather than headlines can help improve your odds of staying disciplined when it matters most.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation. Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only.
Jack Phelps
Managing Partner / Financial Advisor