Stock Market’s Best Days Often Come Amid Crises, Not After Calm Returns

Financial commentator Tomer Veron highlights that the stock market’s strongest gains frequently occur during periods of extreme fear and downturns, rather than after stability returns. Using data from the S&P 500 index dating back to 1957, Veron shows that 19 of the 20 best trading days happened when the market was at least 20% below its peak, often during bear markets and financial crises. For example, during the 2008 global financial crisis, nine of these top days occurred, including an 11.6% surge on October 13, 2008, the index’s best day since 1957. Similar patterns appeared during the COVID-19 pandemic, the dot-com bubble burst, the 1987 crash, and recent inflation-driven declines.

Veron emphasizes that these sharp rebounds often follow or coincide closely with severe market drops, sometimes within days. Missing these key recovery days by exiting the market during downturns can drastically reduce long-term investment returns. He cites research showing that avoiding the 10 best days in the S&P 500 over 30 years could cut gains by more than half, and missing 20 best days reduces returns to less than a third of the full investment period.

The article also notes that the Tel Aviv 125 index exhibits similar behavior, with significant positive days occurring amid local and global uncertainty, including a 7.5% jump in March 2020 during the pandemic. Veron advises investors not to rely on timing the market or reacting to daily fluctuations but to build portfolios with appropriate risk tolerance and investment horizons. He stresses that investment decisions should be made well before market turmoil, considering liquidity needs and risk capacity.

Ultimately, Veron’s message is that enduring market volatility is part of achieving long-term equity returns. The best days in the market do not wait for calm but come as part of the storm, and investors must be prepared to stay invested through the worst times to benefit from the best days.