Overview: Strong Long-Term Gains Despite Frequent Drawdowns

The S&P 500 has proven to be one of the most resilient and rewarding investment vehicles in global markets. According to data compiled by Charlie Bilello and Creative Planning, from 1980 through June 27, 2025, the index delivered an average annual total return of 12%, despite experiencing an average intra-year drawdown of -14%. This dynamic reinforces a fundamental market principle: no risk, no reward.

What Is a Drawdown, and Why Does It Matter?

A “drawdown” refers to the peak-to-trough decline an asset experiences during a given year. These declines often cause emotional reactions among investors, leading to premature sell-offs. However, historical trends in the S&P 500 show that even during years with steep interim declines, the market frequently ends the year with a net positive return.

For example, in 2020 the index suffered a dramatic -34% intra-year decline, only to finish the year with an 18% gain. Similarly, in 2023, the index saw a -25% drop but recovered strongly to close the year up 26%. These cases highlight the disconnect between short-term fear and long-term market performance.

A Decade of Resilience: 2015–2024

The past decade offers an especially vivid display of long-term market strength. From 2019 through 2021, the S&P 500 posted impressive annual returns of 29%, 16%, and 26%, respectively, even as intra-year volatility ranged from -7% to -34%. The data shows that despite macroeconomic shocks—from COVID-19 to rising inflation and monetary tightening—markets remained robust.

2022 stood out as a more turbulent year, with a 25% intra-year drop and an annual loss of -18%, driven by aggressive rate hikes and global uncertainty. Yet by 2023, markets staged a strong rebound, underscoring the importance of staying invested.

Crisis and Recovery: Lessons from Historical Lows

2008 remains the most severe crisis in the observed timeline, with the S&P 500 declining 49% intra-year and ending the year down -37% due to the subprime mortgage crisis. However, this was followed by two consecutive years of strong gains: 26% in 2009 and 15% in 2010. These results confirm that the market typically rebounds strongly after sharp selloffs.

Another illustrative example is 2002, when the index saw a 34% intra-year drop, but by 2003 it had rebounded with a 29% gain. Investors who stayed in the market reaped the benefits of a disciplined, long-term strategy.

The Value of Long-Term Exposure

The chart reveals that in 45 calendar years, the S&P 500 ended 34 of them in positive territory, despite experiencing notable drawdowns in each of those years. In only a handful of instances did intra-year declines result in annual losses—and even then, the following years often delivered substantial recoveries.

This pattern illustrates the power of time in the market over timing the market. Investors who maintained their exposure to the index—not reacting emotionally to drawdowns—ultimately saw solid long-term gains.

Where Does 2025 Stand?

As of June 27, 2025, the S&P 500 is up 6% year-to-date, with an intra-year decline of just -8%. If historical patterns hold, the index is likely to close the year in positive territory. While no future is guaranteed, history favors the patient investor who withstands short-term noise.

Strategic Implications for Investors

The data is clear: reacting to short-term volatility often leads to missed opportunities. For both passive investors and long-term allocators, staying the course during intra-year declines has historically yielded strong returns. Rather than panic during dips, seasoned investors often view them as opportunities to buy high-quality assets at discounted prices.

Especially in an era of algorithmic trading, financial media saturation, and global uncertainty, emotional discipline has become a vital asset. The long-term upward trajectory of the S&P 500 suggests that market setbacks are typically temporary, while growth compounds over time.

Conclusion: Volatility Is the Price of Admission for Long-Term Wealth

Over the last four and a half decades, the S&P 500 has demonstrated extraordinary resilience. Despite wars, financial crises, pandemics, and tightening cycles, the index has continued to reward patient investors with double-digit annualized returns.

The key takeaway for any market participant is this: don’t let temporary losses derail a permanent plan. The evidence shows that even after brutal drawdowns, markets recover—often faster than expected. Instead of trying to outsmart the market, the smarter strategy is often simply not to get out.

With the S&P 500 continuing to reflect the strength of the U.S. economy and the innovation of its largest companies, long-term exposure remains one of the most compelling strategies for building and preserving wealth. The message for 2025 and beyond? Stay invested, stay disciplined, and let history work for you.