Four Historical Patterns in the Markets for Investors to Know
Market performance regularly runs a gamut of annual dips and flat cycles to corrections and crashes. Investors who know the patterns can set reasonable expectations.


After a few great years of positive returns, it can be easy to forget the reality that markets don’t always go up. To put it simply, the market can go up, down or stay flat for an extended period. Past performance cannot predict future performance. But it can help set reasonable expectations.
Here is a brief review of five historical patterns that investors should know in order to maintain proper expectations. I will present the evidence and let you make the conclusions.
Annual dips
Since the ’80s, historically speaking, at some point in every year, the S&P 500 has a drop, from peak to trough. Sometimes it’s been drops of only a few percentage points, while other years it’s gone down as much as 49%. That means that you may not need to panic if the market takes a little dip from time to time.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Market corrections
Since the 1950s, the S&P 500 has experienced around 38 market corrections. A market correction is considered to be a decline of 10% or more from the recent closing high. That means that historically speaking, the S&P 500 has experienced a correction every 1.84 years. It would not be out of line to have the expectation that the market could correct every two years or so.
Market crashes
Since 1900, the market has had a pattern of crashing every seven to eight years, according to Morningstar and Investopedia. It is not an exact pattern (e.g., no significant crash in 2015), but there seems to be enough data to at least mention it. Here are some of the larger market crashes we’ve experienced over the years. The dates reflect when the crash started (the peak).
- 1903 - Rich Man’s Panic (-22%)
- 1906 - General panic (-34%)
- 1911 - WWI and influenza (-51%)
- 1929 - Great Depression (-79%)
- 1937 - WWII (-50%)
- 1946 - Postwar bear market (-37%)
- 1961 - Cold War/Cuban Missile Crisis (-23%)
- 1966 - Recession (-22%)
- 1968 - Inflation bear market (-36%)
- 1972 - Inflation, Vietnam War and Watergate (-52%)
- 1980 - Stagflation (-27%)
- 1987 - Black Monday (-30%)
- 1990 - Iraq invaded Kuwait (-20%)
- 2000 - Dot-com crash (-49%)
- 2007 - Housing crisis (-56%)
- 2020 - COVID-19 pandemic (-34%)
Flat markets
Since the year 1900, there’s been an interesting pattern of a grand scale. For years, I was told that markets trend. After reviewing the historical data, I think it’s more like markets cycle. Every 20 years or so, the markets have gone flat for an extended period.
Again, it’s not an exact pattern, but it is worth mentioning. The following are periods where the market remained flat from the starting point to the ending point — the overall return would be about 0% had you not reinvested dividends. In other words, had you invested in the market, you would not have made money during these periods:
- 1906-1924 (19-year flat market cycle)
- 1929-1952 (24-year flat market cycle)
- 1966-1978 (13-year flat market cycle)
- 2000-2012 (12-year flat market cycle)
Some strategies to consider
There’s no such thing as a perfect investment. There’s no such thing as a perfect investment strategy. Markets can go up, down or stay flat for extended periods. Having the right expectations associated with appropriate timelines is crucial when making decisions whether it makes sense to invest or not.
Sometimes, investing in the market is not the right choice, and that’s OK. Sometimes, it may make more sense to focus on paying off debt. Other times, it may make more sense to pick an investment or product that has less growth potential and less downside risk. Don’t let greed or FOMO (fear of missing out) on potential growth lead you down the wrong path.
If you are nervous about a potential market dip, crash or flat market cycle, consider the following strategies.
First, consider investments and products that offer principal protection — CDs, fixed- and fixed-indexed annuities and cash value life insurance.
Annuities do not have to be income streams. They can also act as a bond alternative and be positioned within your portfolio to offer growth potential and principal protection.
Cash value life insurance can offer similar benefits to annuities that are focused on growth potential, assuming that you also want a death benefit, you are reasonably healthy, and you qualify for a policy with low fees.
Any investment or product that offers principal protection may be able to help you make money during the positive years, including the positive years within a flat marketing cycle while helping protect you from loss in the negative years.
Second, consider the principle of diversification, which suggests that you diversify your assets by objectives instead of lumping everything together in investment ambiguity. You may be able to divide your assets with different time-based goals.
Third, consider working with an adviser who offers something other than a buy-and-hold strategy. If you go down this route, you will probably be taking on more risk, which may not be right for you. According to the SPIVA (S&P Indices Versus Active) Scorecard, only 21% of money managers beat the S&P 500 in any given year. In other words, proceed with caution if you decide to hire a money manager who actively trades on accounts.
Whatever path you decide, remember: There is no such thing as a perfect investment or a perfect investment strategy. Make sure you do a fair amount of research before making any financial decisions.
Related Content
- Managing a Concentrated Stock Position: Too Much of a Good Thing
- Investment Gamification: Not All Cons, Some Important Pros
- Retirement Planning with Life Insurance
- What Is Indexed Universal Life Insurance and How Does It Work?
- Social Security Optimization If You Save More Than $250,000
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Mike Decker is the author of the book How to Retire on Time, creator of the Functional Wealth Protocol, and the founder of Kedrec, a Registered Investment Advisory firm located in Kansas that specializes in comprehensive wealth planning and management at a flat fee. He specializes in creating retirement plans designed to last longer than you™, without annuitized income streams or stock/bond portfolios. In addition to helping people achieve their financial goals, Decker continues to act as a national coach to other financial advisers and frequently contributes to nationally recognized publications.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online Bargains
Feature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025
IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?
You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
As the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
-
Why Homeowners Should Beware of Tangled Titles
If you're planning to pass down property to your heirs, a 'tangled title' can complicate things. The good news is it can be avoided. Here's how.
-
A Cautionary Tale: Why Older Adults Should Think Twice About Being Landlords
Becoming a landlord late in life can be a risky venture because of potential health issues, cognitive challenges and susceptibility to financial exploitation.
-
Home Equity Evolution: A Fresh Approach to Funding Life's Biggest Needs
Homeowners leverage their home equity through various strategies, such as HELOCs or reverse mortgages. A newer option: Shared equity models. How do those work, and what are the pros and cons?
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the Fairway
Think of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty Moves
If you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.