History Says the Best Time to Buy Stocks May Be Imminent

When is the best time to buy stocks? Perhaps when the timing feels worst. Some of the most powerful stock market rallies came following periods of anxiety and uncertainty -- not when everything seemed to be sunshine and roses.

There's an old Wall Street adage that describes this dynamic: "Stocks climb a wall of worry." On a similar note, legendary investor Warren Buffett famously stated, "We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful."

Could the best time to buy stocks be imminent? History says the answer is "yes."

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Correcting the correction

Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the Nasdaq Composite Index (NASDAQINDEX: ^IXIC) were recently in correction territory. The S&P 500 (SNPINDEX: ^GSPC) came precariously close to a correction.

For many investors, buying stocks during a downturn is scary. However, past corrections for the major indexes presented tremendous buying opportunities.

As a case in point, look at last year. President Trump's trade policy, especially his "Liberation Day" announcement of steep across-the-board tariffs, sent the Dow, Nasdaq, and S&P 500 into a correction. By the end of the year, though, all three indexes were up by double digits. The Nasdaq gained more than 20%.

It was a similar story in 2020. All three major indexes plunged amid the COVID-19 pandemic shutdowns. By year-end, however, they were all in positive territory, with the Nasdaq delivering a nearly 44% return.

And these aren't outliers. Historically, most corrections for major indexes have been followed by significant gains over the next 12 to 36 months. The pattern is remarkably consistent.

Political tailwinds

Beyond the correction setup, there's a calendar-based reason for optimism: 2026 is a mid-term election year--and that matters more than you might think.

The Stock Trader's Almanac introduced the Presidential Election Cycle Theory in 1967. This theory posits that stock market performance typically follows a four-year cycle based on the U.S. presidential term. It suggests that the stock market tends to perform the weakest during the first two years of a presidential administration. However, the market frequently rebounds and peaks in the third year before gains moderate in the fourth year.

Is there any historical support for this theory? Actually, yes. Charles Schwab (NYSE: SCHW) analyzed market data from 1933 to 2015. The financial services company calculated the following average returns for the S&P 500 in each year of a new presidential term:

• Year 1: +6.7%
• Year 2: +3.3%
• Year 3: +13.5%
• Year 4: +7.5%

While this data only runs through 2015, the pattern has broadly continued in recent cycles. Analysts point to three reasons for this phenomenon:

1. During the third year of an administration, presidents can advocate for pro-growth policies or increased spending to boost the economy in hopes of bolstering political support for reelection of the election of their successor from their party.
2. Mid-term elections often result in the "out" party gaining control of at least one chamber of Congress. Investors like gridlock because it usually translates to relative stability.
3. Uncertainty about what will happen next is usually largely resolved by the mid-term elections, frequently leading to stock market gains in the following year.

Permanent imminence?

While history points to this moment as especially opportune, the deeper truth is that, for long-term investors, the best time to buy stocks is always imminent -- because time, not timing, is what matters most.

My Motley Fool colleague Brian Orelli wrote an article back in 2013 titled, "Johnson & Johnson (NYSE: JNJ) Stock Is Always a Buy (If You Hold Long Enough)." His statement has stuck with me through the years. His premise was right -- and it also applies to the broader stock market.

Granted, you can make more money if you manage to buy when the market is trading at a discount (like now). However, history has shown that you will always make money investing in the Dow, the Nasdaq, or the S&P 500 if you hold long enough.

I opened with one investing adage, so I'll close with another that may matter even more: 'Time in the market beats timing the market.' History says now may be a great time to buy--but for patient investors, the best time is always now. For investors with cash on the sidelines, history suggests now may be a particularly rewarding time to put it to work.

Charles Schwab is an advertising partner of Motley Fool Money. Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and Johnson & Johnson and recommends the following options: short March 2026 $100 calls on Charles Schwab. The Motley Fool has a disclosure policy.