The Motley Fool says long-term investors should keep buying rather than wait for a crash: after 16 S&P 500 drops of at least 20% since 1940, the average 12-month return from the day the index hit that threshold was 17.3%. The article says crash timing is unknowable.
Deeper declines were common: 13 of those 16 bear markets fell more than 25% from their peaks, and nine exceeded 30%. The article reports average one-year returns of 21% after a 25% drawdown and 22.8% after a 30% drawdown.
As reasons a downturn could come sooner, the article cites a near-record cyclically adjusted price-to-earnings ratio for the S&P 500, a record-high Buffett indicator and the index’s concentration in large technology companies tied to AI. It says these conditions do not make the timing of a crash predictable.
