Major stock indexes have taken a nasty tumble this week after President Donald Trump announced his latest tariff plans. Many countries are issuing retaliatory tariffs against the U.S. as well. The Nasdaq Composite (NASDAQINDEX: ^IXIC) swiftly fell into a bear market, as of this writing, while the S&P 500 (SNPINDEX: ^GSPC) inches closer by the hour.
Jerome Powell, chair of the Federal Reserve, warned in a speech on Friday that “tariffs are highly likely to generate at least a temporary rise in inflation.” He also noted that economic growth could slow, potentially leading to “elevated” levels of unemployment.
Economic experts are also sounding recession alarms. Analysts at J.P. Morgan revealed this week that they predict a 60% chance of a recession by the end of 2025, up significantly from the 40% prediction prior to Trump’s tariff announcement.
None of this is good news for Americans, but there’s still reason to be hopeful right now. If I could tell all investors one thing about the stock market, it’s this: Time is your best friend.
Despite experiencing stomach-churning volatility in the past, the stock market has survived every single recession, crash, and bear market so far. Many of those downturns have happened in the relatively recent past, and investors who stayed in the market reaped the rewards.
In the early 2000s, for example, we saw the dot-com bubble burst and the resulting bear market (which would go on to become one of the longest bear markets in the S&P 500’s history). Just as stocks recovered, the market was hit by the Great Recession — the worst financial crisis since the Great Depression.
After several years of growth, we then faced the COVID-19 crash in 2020. The S&P 500 lost roughly one-third of its value in three weeks, becoming one of the fastest market crashes in history. However, since January 2000, the S&P 500 has still soared by 245%.
Time is your most valuable asset when it comes to surviving volatility. The average S&P 500 bear market lasts around 9.5 months, with extra-long bear markets (like the one following the dot-com bubble burst) lasting around two years.
While that can seem like an eternity in the moment, good economic times tend to far outlast the bad. The average S&P 500 bull market has lasted around three years, with the period of prosperity following the Great Recession lasting a staggering 11 years.
With stock prices plunging further by the day, it can be tempting to pull your money out of the market or stop investing altogether. While that strategy makes sense on the surface, the market’s unpredictable nature could cause it to backfire.
