Year to date, the S&P 500 index is essentially unchanged as of the close on Wednesday, May 14, 2025: up 0.19%. This number may seem surprising given the undulating roads Mr. Market has been on.
The S&P 500 has already experienced five days with a daily change of more than 3%: two up and three down. The last time the index experienced a daily change that big was two and a half years ago. The S&P 500 gained 5.5% on November 10, 2022.
It is not just the daily moves or the bigger intraday swings—the speed of these moves has caused investors to feel like they have been on a roller coaster. The S&P 500 lost 18.9% of its value in a period of just seven weeks between the middle of February and early April. It then needed just five weeks to rebound to breakeven for the year.
One of the insights we shared during last month’s webinar, “Volatile Markets? How to Stay Calm and Invest Smarter in 2025,” was how big up and down days are frequently clustered together. This year has been no exception. Here are the S&P 500’s five biggest daily moves in chronological order:
- April 3: (4.84%)
- April 4: (5.97%)
- April 9: 9.52%
- April 10: (3.46%)
- May 12: 3.26%
Four of them occurred within a span of just eight calendar days. They also corresponded with the S&P 500 hitting a bottom. Those investors who did not panic during the heightened volatility and kept their portfolios unchanged have emerged largely unscathed. [My 403(b) plan balance was roughly even compared to six months ago when I checked it over the weekend—my first time reviewing the account since last November.]
Those who opportunistically bought during the downturn have fared even better. I was among those who did, though in a different account than my 403(b). My reasoning was simple: Corrections—declines of 10.0% to 19.9%—are more common than bear markets, which are declines of 20% or more. Even if the stock market had continued to fall, history shows most bear markets bottoming with losses of less than 30%.
The stock market is never guaranteed to repeat past performance, but history does provide a good guide for using downside volatility to your advantage.
Putting This Year’s Volatility Into Perspective
This year is already the fourth most volatile of the past 10 years based on the number of days the S&P 500 has closed with a gain or loss of 2% or more. There have been 11 such days so far. Given the ongoing headline environment, it seems likely that 2025 will exceed the third-most-volatile year of the past decade, 2018, with 16 days of moves of 2% or more in either direction.
We have seen higher levels of volatility in recent times: 2020 and 2022. Bear markets occurred in both years.
Volatility is often viewed negatively even though it refers to the magnitude of change in stock prices—and not their direction. Nobody complains when stocks make big upside moves. It is the downward drops that few investors like.
Yet, downside volatility is a gift to investors saving for long-term goals. Lower prices enable you to buy more shares with each dollar invested. If you are putting money into long-term investments, be greedy when stocks go on sale. Your future self will thank you.
Pessimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment increased.
Bullish sentiment, expectations that stock prices will rise over the next six months, increased 6.5 percentage points to 35.9%. Bullish sentiment is below its historical average of 37.5% for the 18th time in 20 weeks and is above 30% for only the sixth time this year.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 0.6 percentage points to 19.7%. Neutral sentiment is unusually low and is below its historical average of 31.5% for the 43rd time in 45 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 7.1 percentage points to 44.4%. Bearish sentiment is unusually high and is above its historical average of 31.0% for the 24th time in 26 weeks.
The bull-bear spread (bullish minus bearish sentiment) increased 13.6 percentage points to –8.5%. The bull-bear spread is below its historical average of 6.5% for the 19th time in 21 weeks.
This week’s special question asked AAII members what they think about the Federal Reserve’s decision to keep interest rates unchanged.
Here is how they responded:
- It was the right move: 73.6%
- They should have cut rates: 17.1%
- They should have raised rates: 2.7%
- Not sure/no opinion: 6.6%