Despite year-to-date gains of 13% for the S&P 500 and 15% for the Nasdaq Composite, historical patterns indicate that future market downturns are inevitable. According to data from YCharts, buying during these corrections has historically produced significant one-year returns, with the S&P 500 averaging an 18% gain and the Nasdaq Composite averaging a 23% gain following the first close in correction territory since 2010.
The S&P 500, which tracks 500 large U.S. companies with a minimum market cap of $22.7 billion, serves as a primary benchmark for the domestic market, covering 80% of U.S. equities by market value. Since 2010, this index has experienced 10 market corrections, occurring on average once every 19 months. Two of these corrections escalated into bear markets, which have occurred once every eight years on average. In each instance, the index recovered its losses, typically with a swift rebound.
Specifically, when the S&P 500 first closes at least 10% below its previous bull market high, marking the start of a correction, the average one-year return has been 18%. In cases where the decline deepens to bear market territory, defined as a close at least 20% below the record high, the average one-year return following that first close has been 38%. The corrections in 2020 and 2022 eventually transitioned into bear markets.
The Nasdaq Composite, which includes more than 3,000 companies and is heavily weighted toward the technology sector, has shown a similar pattern but with higher frequency and volatility. Since 2010, the Nasdaq has suffered 14 corrections, averaging one every 14 months. Four of these turned into bear markets, occurring on average once every two years. The index has always recovered its losses in these scenarios.
Following the first close in correction territory for the Nasdaq Composite since 2010, the average one-year return has been 23%. When these corrections evolved into bear markets, as seen in 2018, 2020, 2022, and 2025, the average one-year return following the first close in bear market territory has been 39%. The data suggests that investors who purchase stocks or index funds tracking these benchmarks during downturns have historically captured substantial gains as markets rebound.