📈  Chart of the Week 8/10/2025

By Michael Allison, CFA

The Importance of Staying the Course

One glance at the history of S&P 500 bull and bear markets tells a clear story: patience pays. The average bull market has lasted 5.3 years and delivered a +254% total return. The average bear market? Just 1.0 year with a -31% decline. In other words, the market spends far more time compounding wealth than destroying it.

And yet, the sting of losses is deeply psychological. Behavioral finance research shows that investors feel the pain of losses about twice as strongly as they feel the pleasure of gains. This often drives the worst possible decision—selling during drawdowns and missing the powerful rebound that typically follows.

History is unambiguous on this point: missing just the first 12 months after a major market bottom can have an enormous impact on lifetime returns. Following the 2008–2009 financial crisis, the S&P 500 surged over +68% in the first year of recovery. Those who sat on the sidelines waiting for “clarity” missed a chunk of the very returns that fuel long-term compounding.

That compounding is the quiet but relentless driver of wealth creation. A dollar invested at the start of the 1982 bull market grew more than 14x by the peak in 2000. Even through subsequent bear markets, reinvested dividends and market growth have produced exponential increases in wealth for those who stayed invested.

The lesson is as old as the market itself: downturns are temporary, but the upward drift of equities over decades is persistent. Successful investing requires enduring short-term discomfort to capture long-term gains. Selling in fear interrupts the compounding process, turning temporary losses into permanent ones. The real risk isn’t staying in—it’s missing the recovery.

Sources: Creative Planning, Behavioral Economics, SP Global

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