Line chart shows growth of the S&P 500 Index level (log scale) and the Dow Jones Industrial Average across numerous market-related events.
Left Y-axis: S&P 500 Index level (log scale), right Y-axis: Dow Jones Industrial Average Index level (log scale) ; X-axis: 1965-2022
Chart shows growth of S&P 500 from less than 100 to 3,586 in a little more than 50 years, across volatility related to eight recessions, several wars, and other events. The Dow Jones Industrial Average generally follows the trend line of the S&P 500 Index, tracking it most closely from 1980 to the early 2000s, and again from early 2020 to the most recent data. The Dow opened the period around 900 and by the end of Q3 2022 had risen to over 28,725.
Recessions:
- 1969-1970—S&P 500 Index drops sharply but largely recovers within two years
- 1973-1975—S&P drops sharply and does not recover to previous high until early 1980s
- 1980—Short recession sees quick drop and quick recovery immediately after recession
- 1981-1982—S&P declines through most of recession, recovers quickly afterward
- 1990-1991—Sharp drop during short recession, S&P recovers previous high during recession
- 2001-2002–S&P drops sharply and does not recover previous high until just before next recession
- December 2007-June 2009—Very sharp drop for S&P 500, which falls more than 775 points in one day. Market does not recover for several years.
- February-April 2020—Recession prompted by coronavirus pandemic and related economic slowdown.
Events:
- Martin Luther King, Jr. shot (1968)—S&P 500 stocks were up 2.3% in April, when King as assassinated.
- Robert F. Kennedy shot (1968)—S&P 500 stocks declined -0.2% in June, when Robert Kennedy was shot.
- President Nixon resigns (1974)—Stocks find their bottom less than two months after Nixon’s resignation, ending a bear market.
- Vietnam War (until 1975)—Stocks remain relatively flat, with a 6.4% return for large cap stocks.
- Iran hostage crisis (1979)—The S&P 500 gains more than 25% despite international tensions.
- Stagflation (mid-to-late 1970s)—High rates of inflation and unemployment contribute to economic slowdown.
- HIV/Aids (June 1981)
- Federal Reserve money tightening (mid-1980s)—Tight money policy helps trigger recession of 1981-1982.
- Stock market crash (1987)—S&P 500 Index drops more than 18% on Black Monday.
- Gulf War (1990-1991)—S&P 500 increases from roughly 335 to 370 during this period.
- Oklahoma City bombing (1995)—S&P 500 produces a 37.6% return for the year.
- World Trade Center/Pentagon attacks (2001)—Stocks continue decline through 2001 recession and beyond.
- SARS (April 2003)
- Iraq War (2003-2011)—Initial positive movement followed by sharp decline during 2008-2009 recession with partial recovery by 2011.
- Avian (Bird) flu (June 2006)
- TARP passed (2008)—Sharp drop in markets due to broad economic issues. See 2007-2009 recession.
- H1N1 Swine flu (April 2009)
- $787 billion stimulus package approved (2009)—S&P 500 begins lengthy recovery, from low 700s to 1,300s by April 2011.
- U.S. debt downgrade (2011)—S&P 500 falls 6.7% to 1,119.46. All 500 stocks decline.
- Fiscal cliff (2013)—Historic stock market gains after lawmakers approve huge tax and spending deal.
- MERS (May 2013)
- U.S. tax reform (2017)—Stocks surge in anticipation of tax reform.
- Fed policy uncertainty and political risks (2018)—Increasing volatility and sharp decline in December.
- Coronavirus (COVD-19, January 2020) pandemic and related uncertainty led to sharp S&P 500 Index drop of more than 600 points in Q1 2020 from just over 3,230 (Q4 2019), but by the end of Q3 2021, the index had more than recovered, at about 4,300. The Dow closed the quarter near 33,844.
Sources: Wells Fargo Investment Institute and Bloomberg. Monthly data from January 1, 1965 to September 30, 2022. Shaded areas represent recessions. TARP = Troubled Asset Relief Program. Fed = Federal Reserve. SARS = Severe Acute Respiratory Syndrome. MERS = Middle East Respiratory Syndrome. For illustrative purposes only. A price index is not a total return index and does not include the reinvestment of dividends. The S&P 500 Index is a market capitalization-weighted index composed of 500 stocks generally considered representative of the U.S. stock market. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. Index returns do not represent investment performance or the results of actual trading. Index returns represent general market results and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. There is no certainty that U.S. markets will continue to show resilience despite crisis events. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. There is no guarantee equity markets will perform similarly during other periods of uncertainty. All investing involves risk including the possible loss of principal.
Key Takeaways
- Volatility is a normal part of market behavior and can present opportunities for long-term investors.
- Geopolitical crises, terrorist attacks, economic recessions, epidemics, or consequential central-bank policies can trigger short-lived yet influential market disruptions.