The climb back: What past downturns tell us about the road to recovery
Encouraging lessons about volatility and the power of staying invested
WHEN MARKETS GET CHOPPY, being reminded that volatility is “a normal part of investing” can seem less than reassuring. “But, going back to 1950, though each period of volatility has had its unique causes, each was also followed by recovery,”1 says Marci McGregor, head of Portfolio Strategy for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. Taking a look back at how markets have historically performed offers useful perspective to help investors navigate the ups and downs, she notes.
In the video above, McGregor sits down with CIO Investment Strategist Kirsten Cabacungan to explore the four phases of market recovery, from reset to regrowth, mapped out by the CIO, based on historical trends. “This market period has been extremely volatile,” says Cabacungan. “But when you look at the maximum drawdown so far in the S&P 500, it hasn't breached the 20% decline that we typically see in a bear market.2 After these periods of declines, we historically have seen the index recover — some on average within 10 months.”3
In the near term, Cabacungan suggests that investors play defense and offense within portfolios, focusing on high quality, and staying diversified. “Remember that the very best days in the market have often followed the very worst days, and it's impossible to time both,” adds McGregor.
For a deeper dive on past downturns and their recovery periods, read “Eyes on the road ahead,” filled with charts and infographics that capture the phases of past market recoveries and the potential opportunities that volatility can create. Get the latest market insights from the CIO by tuning in regularly to the Market Update audiocast series.
1 Sources: Bloomberg; Yardeni Research. Data as of April 9, 2025.
2 The 2025 max drawdown reflects data from February 19, 2025 to April 8, 2025. Sources: Bloomberg; Yardeni Research. Data as of April 9, 2025. Chief Investment Office; Bloomberg.
3 Reflects the average length of time it took for the S&P 500 to recover its prior peak following bear market declines between 20-30% since 1950. Sources: Chief Investment Office; Bloomberg; Yardeni Research. Data as of April 9, 2025.
Important disclosures
The opinions expressed are as of 4/23/2025 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
