Bear markets in the S&P 500 with a 25% intra-year decline are quite rare, and that alone is an indicator of the resilience of the financial markets. However, the good news is that statistically, one year later, these lows tend to have surprising strength, with the S&P 500 averaging a 38.0% increase. This is clear proof of how investors can reap substantial rewards if they can weather the storms in the markets.
It was observed that stocks hit rock bottom on 10/12/2022, after a 25.2% intra-year bear market. This marks a significant turning point and an example of the famous saying "buy low, sell high." Investors who had the courage to stand firm during the turbulence can now reap the rewards of this subsequent bull market.
If the previous year was negative, but the S&P 500 rises during the Christmas Rally in the current year, along with a positive performance in January of the next year, generally very good things may be on the horizon. This trend is a powerful indicator of a potential turnaround in the financial markets. When we observe this scenario, the outlook for the following year becomes incredibly optimistic.
History shows us that in cases where the Christmas Rally and the month of January have yielded positive results after a previous year of negative performance, investors have had reasons to smile. It's as if the winds of change are blowing in their favor.
What makes this situation even more intriguing is the fact that the entire following year has never been below and has never gained less than double digits.
