Imagine waking up to headlines announcing a 30% drop in the stock market. Your portfolio—carefully built over years—has just lost a significant chunk of its value. Are you ready? Do you know what you would do next? Or would you be left scrambling, uncertain, and emotional as markets tumble?
If you’re like most investors, you haven’t experienced a truly severe market drawdown in over a decade. The last time the market suffered a major, prolonged drop was during the 2008 financial crisis. Since then, volatility has certainly made headlines, but the markets have largely recovered quickly. This long period of relative calm can lull even seasoned investors into a false sense of security. But history—and the numbers—tell a different story.
Let’s look at the facts. Since 1928, the S&P 500 has experienced multiple severe drawdowns, including the Great Depression (-86%), World War II (-77%), the 1970s stagflation (-48%), the dot-com bust (-49%), and the 2008 financial crisis (-57%). Even in recent years, sharp corrections and bear markets have been a regular feature of investing, not an exception.
Average Correction: A drop of -14.3%, typically lasting 5 months—but recovery can take just 4 months if you stay invested2.
Average Bear Market: A fall of -34.7%, taking about a year and a half to hit bottom, and over two years to recover.
“It’s not a matter of if there’s going to be a bear market or recession. These things happen. They happen regularly.”
It’s easy to say you’re a long-term investor—until you’re staring at a 30% loss. The emotional toll of watching your savings shrink can lead to costly mistakes: panic selling, abandoning your strategy, or missing out on the recovery that often follows steep declines.
Ask yourself:
How much could your portfolio fall before you’d feel compelled to act?
What rules or steps do you have in place to manage your finances when markets drop?
Do you have a clear, written plan—or are you relying on gut instinct?
Most investors only realize their true risk tolerance after the fact, often when it’s too late to make rational decisions.
Diversification and asset allocation are powerful tools. A well-balanced portfolio (such as a 60/40 mix of stocks and bonds) has historically smoothed out the ride, reducing the pain of drawdowns while still delivering strong long-term returns. But even diversified portfolios are not immune to losses. Bonds, developed markets, and emerging markets all experience their own cycles of volatility and recovery.
What would you do if your portfolio fell 20%, 30%, or even 40%?
How would a prolonged market downturn affect your retirement, your ability to fund college, or other financial goals?
Do you have a strategy for rebalancing, tax-loss harvesting, or opportunistic investing during downturns?
Who will you turn to for advice when emotions run high and the headlines are scary?
The truth is, most investors are not emotionally or strategically prepared for the next major market drawdown. Failing to have a plan—and to understand the risks you’re actually taking—is one of the biggest mistakes you can make.
At Sterling Edge Financial, we help clients:
Visualize and model worst-case scenarios
Build rules-based strategies for both growth and protection
Stay focused on their long-term goals, even during market turmoil
Gain clarity on what to do before the next crisis hits
“If you’re looking for a thought partner, someone to help you strategize and model out worst-case scenarios, don’t hesitate to reach out to Sterling Edge Financial. This is something we help our clients do every day.”
The next market drawdown isn’t a matter of if, but when. Will you be ready—or will you be caught off guard?
If you’re not sure how your portfolio would weather the storm, or if you don’t have a clear plan for managing risk, now is the time to act. Let’s have a conversation about your goals, your risk tolerance, and your strategy—before the next headline shakes the markets.
Challenge yourself: Are you really prepared? If not, Sterling Edge Financial is here to help you navigate whatever comes next.
Ready to stress-test your portfolio? Contact Sterling Edge Financial today.