Stock Market Crash: What History Says Comes Next After the Market's Big Single-Day Dip.
Key Points
The market has a strong history of quickly rebounding after big down days.
The market is also entering a historically strong period for stocks.
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Earlier this month, on Nov. 5, the stock market experienced one of its biggest one-day declines in over a year. The S&P 500 (SNPINDEX:^GSPC) dropped 4.3%, and the Nasdaq Composite (NASDAQINDEX:^IXIC) sank 5.5%. That was the market's worst day since April 2, 2025, when President Trump announced his import tariffs.
While the tariff-induced declines could have signaled a broader sell-off, they weren’t, and the market fully recovered all its losses in just over a month. While this type of market rebound may seem unusual, it's not.
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In fact, since 1981, the S&P 500 has recovered from its 10-worst single day declines within two months, eight of those times. Importantly, the S&P 500 has also generated a positive return one year after these big market dips nine out of 10 times, with an over 20% return on eight occasions.
| Date | Event | 1-Day Decline | Days to Recover | Annual Return After 1 Year | Annual Return After 3 Years | Annual Return After 5 Years |
|---|---|---|---|---|---|---|
| 1. Oct. 19, 1987 | Black Monday | -20.5% | 264 | 23.2% | 11.6% | 13% |
| 2. March 16, 2020 | Covid | -12% | 19 | 66.1% | 18.4% | 18.8% |
| 3. March 12, 2020 | Covid | -9.5% | 20 | 59% | 15.9% | 17.7% |
| 4. Oct. 15, 2008 | The Great Recession | -9% | 15 | 20.8% | 10.5% | 13.3% |
| 5. Dec. 1, 2008 | The Great Recession | -8.9% | 6 | 35.9% | 15.1% | 17.2% |
| 6. Sept. 2, 2008 | The Great Recession | -8.8% | 410 | -4.1% | 1.6% | 8.9% |
| 7. Oct. 26, 1987 | Black Monday Aftershock | -8.3% | 5 | 23.6% | 10.2% | 12.9% |
| 8. Oct. 9, 2008 | The Great Recession | -7.6% | 3 | 17.8% | 8.3% | 12.7% |
| 9. March 9, 2020 | Covid | -7.6% | 57 | 41.1% | 12.6% | 16% |
| 10. Oct. 27, 1997 | Asian Financial Crisis | -6.9% | 8 | 21.5% | 16.3% | 0.5% |
Source: Data shown is for the S&P 500 Price Index as of 12/31/25. Morningstar, Ned Davis Research, and Hartford Funds.
As such, history says that this market dip could be one of the best times to buy stocks.
On top of that, the market is entering one of its most bullish historical periods. Since 1938, the S&P 500 has risen in 95% of midterm election years from November through November of the following year. This period also tends to be the market's strongest stretch, with the S&P 500 generating an average annual return of 14.5% during these 12 months.
History would also indicate that a quick rebound could be in store. In midterm election years, the S&P 500 has produced positive returns in Q4 84% of the time, with an average return of 6.6%. The first quarter of the following year tends to be even better, with the market up 95% of the time with an average yearly return of 7.4%. The second quarter of the year after midterm elections also tends to see stocks do well, with the S&P 500 up 74% of the time with an average return of 5%.
It also doesn't matter much which party wins the midterms or which holds the presidency. That said, the combination of a Republican president and a Democratic Congress tends to produce the weakest market gains, with an average return of 4.9%. The S&P 500 has tended to perform much better when Congress is divided, with an average return of 17% when there is a Democratic president and a split Congress, and 13.7% when there is a Republican president and a split Congress.
Image source: Getty Images.
How to play the dip
History suggests a quick recovery from this dip, so I would be a buyer on this pullback.
Tech stocks were among the hardest-hit sectors with the recent pullback, as many newly elected officials called for a pause on the ongoing data center build-out. However, large hyperscalers already appear to have contingency plans, with the potential to shift spending overseas and toward Republican stronghold states like Wyoming. There is also the future potential to build data centers offshore, underwater, and then eventually in outer space.
In my view, the pullback could be a great opportunity to buy top AI semiconductor stocks, like Broadcom (NASDAQ:AVGO) and Advanced Micro Devices (NASDAQ:AMD), as well as hyperscalers like Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN).
In general, though, I think the best core strategy in any market is to consistently dollar-cost average into index exchange-traded funds (ETFs), and if you have a little extra money on the sidelines, investing a little more after big down days is a great option. My top ETF to buy in this sell-off is the Invesco QQQ Trust (NASDAQ:QQQ), which tracks the Nasdaq-100 index. This gives you significant exposure to the top tech names in the market. Meanwhile, an S&P 500-tracking ETF, like the Vanguard S&P 500 ETF (NYSEMKT:VOO), is always a great long-term holding.
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Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Amazon, Broadcom, Invesco QQQ Trust, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Broadcom, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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