The SPDR S&P 500 ETF, which launched on Jan. 22, 1993, has navigated three major bear markets since its inception as the first exchange-traded fund. As the fund approaches its 33rd year, its performance record illustrates how long-term investors can achieve capital appreciation despite severe market downturns.
The ETF tracks the S&P 500 index, a committee-created list of roughly 500 stocks that serves as the standard benchmark for the U.S. economy. Because the index is market-cap weighted, the largest companies exert the greatest influence on its overall performance. Since 1993, the fund has experienced significant drawdowns during the dot-com bubble burst, the Great Recession, and the coronavirus pandemic. While these periods were marked by deep losses at the time, the fund recovered from each event and subsequently reached new highs.
This pattern of alternating bull and bear markets is not unique to the last three decades. Historical data indicates that the market has long cycled between periods of strong and weak performance, with an upward long-term trend persisting despite short-term volatility. When viewed over a longer timeframe, the dot-com crash and the Great Recession appear as minor fluctuations. If one examines only the index's performance prior to 1993, when no ETF tracked it, these specific bear markets become even less distinct against the broader historical backdrop.
The primary implication of this 33-year record is that investors should prioritize buying and holding for the long term. The data suggests that purchasing shares immediately before major crashes like the Great Recession or the dot-com bubble would have resulted in strong capital appreciation through a simple hold strategy. Returns could be improved through dollar-cost averaging, a method of buying shares at regular intervals throughout a downturn. This approach typically results in purchasing more shares when prices are low and fewer when prices are high, which generally lowers the average purchase price over time.
Conversely, selling assets out of fear during market declines is discouraged. Historical evidence indicates that every bear market in this period was eventually followed by a bull market. A secondary lesson from this history is the importance of emotional control. Bear markets are a normal component of investing, and sticking to a long-term plan is essential for navigating them. While deep drawdowns can test an investor's resolve, maintaining a strategy such as buying and holding an ETF like SPY allows investors to ride out these cycles. The historical record supports the conclusion that adhering to a long-term plan through periods of fear leads to favorable outcomes.