A Quarter Century of Panic and Prosperity
Currently, the S&P 500 is knocking on the door of all-time highs — a welcome but not surprising outcome following its first-quarter turmoil. Just under six months ago, the tariff surprise of “Liberation Day” caught investors off guard. The result: a full-blown investor panic. Peak to trough, from February 19th to April 7th, the S&P dropped by about 19%.
Think back, with the market down nearly 20%, did you believe we’d be at all-time highs less than six months later? Did you use the moment to add to your portfolio at favorable prices, or were you swayed by emotion, perhaps selling your investments in favor of cash?
Whatever your experience, 2025 has starkly demonstrated the value of good investment behavior. Downturns are a normal part of investing — and historically always temporary. Investors’ worry in April was just fear, plain and simple. Instead of wringing your hands with what-ifs, choose to gain perspective from this year, and from history before it.
If you were born before 2000, you’ve already survived two of the largest market corrections ever. Furthermore, you’ve witnessed seven bear (or very nearly bear) markets over the last 25 years.
- The Dot-Com Bubble, March 2000 to October 2002: S&P 500 down 49.1% in 929 days
Following a massive run-up in equity prices in the late 1990s, the popping of the dotcom bubble saw the S&P 500 lose almost half its value over approximately two years. Spurred by the mass adoption of the internet, companies promising anything with “.com” on the end were receiving enormous evaluations.
- Global Financial Crisis, October 2007 to March 2009: S&P 500 down 56.8% in 517 days
The Great Recession represents the biggest bear market of the last 25 years and the second largest ever behind the Great Depression. The panic around the overnight bankruptcy of Bear Stearns, one of the oldest U.S. banks, forced the government to intervene and “bail out” several of the nation’s largest banks. The resulting credit freeze brought a meltdown that ultimately crushed the speculative value of single-family homes worldwide. The market tanked, and along with it, the job market.
- European Debt Crisis, April to October 2011: S&P 500 down 19.4% in 157 days
By 2011, with the Global Financial Crisis still raw, Europe’s sovereign debt mess (starting with Greece’s 2009 bailout) threatened to unravel the euro. Closer to home, Tea Party brinksmanship over the debt ceiling sparked fears of a U.S. default. When the rating agency, Standard & Poor’s, stripped U.S. debt of its AAA rating in August 2011, the world’s “risk-free” asset seemed like it might crack.
- Holiday Sell-Off, September to December 2018: S&P 500 down 19.8% in 95 days
Trump’s trade war with China, coupled with global tariffs on steel and aluminum, spooked investors. China’s Shanghai Stock Exchange lost 25% by year-end. The Fed, under new chair Jay Powell, raised rates four times, stoking fears of overtightening. Trump’s threats to fire Powell only made things worse. Sound familiar? Then, a budget standoff over a border wall triggered a 35-day government shutdown — the longest ever.
- COVID, February 2020 to March of 2020: S&P 500 down 33.9% in 33 days
This bear market — notably the shortest of all time — was a response to the COVID-19 global shutdown. Not just a financial panic, this existential event required the world’s governments to initiate massive and unprecedented fiscal and monetary intervention to arrest the decline. This stimulus would contribute to the next bear market just two years later.
- Inflation Spike, January 2022 to October 2022: S&P 500 down 25.4% in 282 days
Speculative investment driven by ample stimulus dollars and a dramatic increase in the available money supply (about 40% over two years) created a firestorm of inflation, the scale of which hadn’t been seen for 40 years. The Federal Reserve reacted by raising interest rates further and faster than in its 100-year history.
- Tariff Trouble, February to April 2025: S&P 500 down 18.9% in 48 days
This year’s panic hit with Trump’s April 2 “Liberation Day” tariff announcement, following a post-election rally fizzle and bear market in the Magnificent 7. When Trump postponed the tariffs for 90 days, the market snapped back.
These dramatic drops plummeted investor portfolios everywhere. Yet patient long-term equity investors were still rewarded. A $100,000 investment left untouched in a S&P ETF in 1999 would be worth more than $600,000 today. Over that same period, the cash dividend of the S&P rose from about $16 in 1999 to around $76 today, roughly 4.5-times higher. All these investors had to do was, well, nothing.
This historical lesson is simple: Everything got more expensive, but a growing dividend income outpaced rising costs. That’s why we’re such big fans of dividends and the companies that pay (and grow!) them.
The enduring value of innovation and the companies that work toward it, even during market-wide crashes, continues to reward steadfast investors. Market declines are normal. Prices temporarily decline 10% to 15% every 12 to 18 months, and 30% to 40% every five to seven years. History tells us to expect these events, planning for both the drop and inevitable ascent that follows. The key is to have a plan and not let fear or greed overwhelm your decisions.
As we enter fall 2025, the S&P 500 is in the green for the year. It’s as if April’s panic never happened. This isn’t a fever dream, but a reminder: Stick to your plan. We don’t forecast markets or economies. Instead, we help clients remain focused on their goals. The businesses we own keep innovating, growing earnings, and raising dividends — powering long-term wealth.
Even when panic whispers in your ear, “This time is different,” remember that it never is. Seven panics, two of which rank among the worst of the last century, reinforce the value of steady, long-term growth. Stay the course, and let history work in your favor.
Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Blind Spots: The Mental Mistakes Investors Make and Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Barron’s Top Financial Advisor and recognized as a Forbes Top Wealth Advisor in Colorado.
