How Likely Is the S&P 500 to Recover After a Bad Year?
The S&P 500 can feel like a wild ride, especially during a “bad year” with negative returns. Whether it’s a steep 38% drop like in 2008 or a milder 6% dip in 2018, these downturns raise a big question: how often does the market recover, and how strong is the rebound?
Related article: What Is The Probability That S&P 500 Will Double In 10 Years?
Historical data from 1957 to 2023 offers some eye-opening insights that might reassure investors.
What Defines a Bad Year for the S&P 500?
A “bad year” is simple: any calendar year where the S&P 500’s price return—excluding dividends—ends negative. Since 1957, this has happened 18 times. Think 1974’s brutal 29% loss or 2022’s 19% slide.
These moments hurt, but the real story lies in what happens next.
How Much Does the S&P 500 Gain After a Bad Year?
Here’s the good news: the S&P 500 doesn’t just crawl back—it often sprints.
On average, the index gains 14.1% in the year following a bad year, based on price return data from those 18 instances.
Take 1974: after a 29% plunge, it roared back with a 31% surge in 1975. Or 2008’s 38% crash, followed by a 23% rise in 2009. That 14.1% average is a testament to the market’s bounce-back power.
| Bad Year | Price Return (%) | Following Year Return (%) | Positive Following Year? |
|---|---|---|---|
| 1957 | -14.31 | 38.06 | Yes |
| 1960 | -2.97 | 23.13 | Yes |
| 1962 | -11.81 | 18.89 | Yes |
| 1966 | -13.09 | 20.09 | Yes |
| 1969 | -11.36 | 0.00 | No |
| 1973 | -17.37 | -29.72 | No |
| 1974 | -29.72 | 31.55 | Yes |
| 1977 | -11.50 | 1.06 | Yes |
| 1981 | -9.73 | 14.76 | Yes |
| 1990 | -6.56 | 26.31 | Yes |
| 1994 | -1.54 | 34.11 | Yes |
| 2000 | -10.14 | -13.04 | No |
| 2001 | -13.04 | -23.37 | No |
| 2002 | -23.37 | 26.38 | Yes |
| 2008 | -38.49 | 23.45 | Yes |
| 2015 | -0.73 | 9.54 | Yes |
| 2018 | -6.24 | 28.88 | Yes |
| 2022 | -19.44 | 24.23 | Yes |
What’s the Win Rate for S&P 500 Recovery?
The odds are even more impressive. The S&P 500 posts a positive return after a bad year 77.8% of the time—14 out of 18 cases. That’s nearly an 8-in-10 chance of recovery.
Since 1957, exceptions like the 2000-2002 losing streak are rare. More often, the market flips the script, turning red ink into green gains.
Can You Count on a Recovery Every Time?
History isn’t a promise. Economic crises, global events, or unexpected shocks can derail a rebound. The 14% average gain and 78% win rate reflect past patterns, not future certainties.
Still, the data shows a clear trend: the S&P 500 rarely stays down for long.
Why This Matters for Investors
For anyone watching the market, these stats are a lifeline. A bad year might spark panic, but a 14% average rebound and 78% recovery rate suggest patience pays off.
Over decades, the S&P 500 has proven it can climb back—often stronger than before.
So, will you bet on the bounce-back next time the market dips? History says it’s a solid wager.