Tops and Bottoms

From the bottom of the Liberation Day sell-off around a year ago the S&P 500 is up 41%.

From the bottom of the 2022 bear market the S&P 500 is up 104%.

From the bottom of the Covid Crash in March 2020 the S&P 500 is up 238%.

From the bottom of the mini-bear market in 2011 the S&P 500 is up 715%.

From the bottom of the Great Financial Crisis in March 2009 the S&P 500 is up 1,292%.

Sure, buying at the exact bottom of a bear market leads to good returns when followed by a bull market. Duh.

What about the tops?

From the peak just before the start of the Liberation Day sell-off the S&P 500 is up 15%.

From the peak just before the start of the 2022 bear market the S&P 500 is up 54%.

From the peak just before the Covid Crash the S&P 500 is up 124%.

From the peak before the 2011 double-dip the S&P 500 is up 564%.

From the peak in October 2007 before the onset of the Great Financial Crisis the S&P 500 is up 524%.

Not as good but still not bad considering those peaks were followed by drawdowns of -19%, -25%, -34%, -19% and -57%, respectively.

Here’s a visual summary:

Of course, no one is lucky enough to invest at the nadir of the market in a downturn. And no one has enough bad luck to invest only at the peak of the market right before a huge decline (save for Bob).

Most people invest at different points along the way. Sometimes it’s near a top or bottom. Most of the time, it’s somewhere in between.

The important part of this data is to recognize that picking tops and bottoms doesn’t matter nearly as much as you think.

Your time horizon is more important than your ability to forecast market turning points.

Further Reading:
How the Stock Market Performs After a Correction