Staying the Course through Volatile Markets
Turbulent times often lead to turbulent markets. Today, investors face a variety of chaotic swings driven by shifting interest rates, geopolitical conflicts, and global economic transitions. Despite the financial "queasiness" these events can bring, experts consistently offer one piece of advice: stay calm and stay the course.
Maintaining a long-term investment strategy is the best way to weather the storm of a volatile stock market; reacting irrationally or panicking is often the costliest mistake an investor can make.
History Tends to Repeat
When headlines turn daunting, it helps to look at the bigger picture. First, a historical review shows that market fluctuations are entirely normal—a comforting reminder when conditions feel unstable. While market downturns are unsettling, history consistently shows that stocks have recovered and delivered significant long-term gains. For example, even after the volatility of the early 2020s and the 2022 bear market, the S&P 500 saw a total return of over 26% in 2023 and nearly 18% in 2025.(1)
Consider the resilience of the market over the last few decades:
- Long-Term Growth: From 1996 to 2025—a 30-year span including the dot-com bubble, the 2008 Financial Crisis, and the 2022 inflation surge—the S&P 500 maintained an average annual total return of 10.4%.(1)
- Proven Recovery: Every major market crash of the last century—from the Great Depression to the 2022 bear market—has been followed by a recovery that eventually surpassed previous highs. This "building block" of economic growth (driven by innovation and corporate earnings) remains the backbone of 20-year retirement plans today.(2)
- The Post-2008 Example: Despite the 2007 housing crisis triggering the worst recession since the 1930s, the 20-year average return (2006–2025) for the S&P 500 stands at 11%. This demonstrates that even when an investor starts right before a major crash, "staying the course" for two decades results in strong double-digit annual averages.(1)
These events reinforce the importance of focusing on long-term goals rather than short-term fluctuations. Markets move through "bull" and "bear" cycles that require time to play out; trying to "time" these trends is rarely successful.
Don’t Try to "Catch a Falling Knife"
A common mistake during a downturn is to stop saving entirely. Following the 2008 crisis, studies showed that over 25% of investors stopped adding to their retirement accounts.(3) However, those who stayed put often saw substantial gains as the market rebounded.
A popular strategy to maintain momentum when nerves are tested is dollar-cost averaging:
- This involves investing a fixed amount on a regular schedule (such as every pay period).
- This approach generally results in buying more shares when prices are low and fewer when they are high.
- It acts as a stabilizing force, reducing the "system shock" and timing risk associated with lump-sum investing.
Turning Lemons into Lemonade
Downturns are actually an ideal time to consult with a financial professional to review your strategy and rebalance your portfolio. This may involve:
- Repositioning: Looking at investments that have lost value to manage risk exposure and prepare for the eventual recovery.
- Roth Conversions: A market pullback is an ideal "tax window" to move money from a traditional 401(k) or IRA to a Roth account. Because share prices are temporarily lower, you can convert a larger number of shares for the same tax cost. This allows the eventual market rebound to happen entirely tax-free within the Roth account, providing a "market recovery advantage."(4)
Market downturns are a natural part of the investing lifecycle. By keeping a steady hand and consulting with an advisor, you can weather the current cycle—and the next one.
Sources:
1 “What Is the S&P 500 and Stock Market Average Return? | Fidelity.” Fidelity.com, 6 Mar. 2026, www.fidelity.com/learning-center/trading-investing/sp-500-average-return.
2 “Guide to Stock Market Recoveries.” Capital Group, 19 July 2023, www.capitalgroup.com/advisor/insights/articles/guide-market-recoveries.html.
3 Betterment. “Betterment’s Consumer Financial Perspectives Report: 10 Years After the Crash.” Sept 2018.
4 Raymond James. Roth Conversions during Market Volatility. Raymond James, 2023.
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