Salvatore M. Capizzi, CEPA, CBDA, is Dunham’s Chief Sales & Marketing Officer with 45 years of financial-services experience. His commentary has appeared on Bloomberg Radio and Yahoo Finance and in Kiplinger, Financial Advisor magazine, and ThinkAdvisor. A 2026 ThinkAdvisor Luminaries and Wealthies finalist, he writes about retirement planning and advanced tax, trust, and estate strategies.
S&P 500 bear market rebounds can begin before investors feel confident that the downturn is over. This analysis examines returns one, three, six, and twelve months after 14 historical bear market lows. Those gains measure the rebound from the bottom, rather than the time needed to regain the previous high. The findings help explain why re-entry decisions matter and why investors need a plan before volatility hits.
Key takeaways
Risk often feels backwards: At market tops, investors may feel more comfortable even as valuations and expectations rise. At bear-market lows, fear can be greatest even though valuations may be lower and future return potential may have improved.
Early rebounds can be substantial: Across these 14 historical lows, the average three-month total return was 18.86%. These gains were measured from bottoms identified in hindsight.
Emotion can hurt portfolios: Investors naturally want to buy low and sell high, but fear and greed cause them to do the exact opposite during market cycles.
A plan can support discipline: Predefined allocation rules can reduce reliance on emotional decisions, but they cannot eliminate investment risk or guarantee better returns.
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Why the Cycle Matters More Than Timing Predictions
Here is the core concept that I learned early in my career.
Markets tend to move in cycles, often in large chunks, and generally over short periods of time.
As I see it, that single sentence is the entire justification for owning more equities at the bottom of a market cycle. What I have seen is that many investors hold less equity at the bottom, whether because fear has driven them out of the market or because a stop-loss program has already triggered it, leaving little or no equity remaining.
They then wait for confirmation that the storm has passed before getting back in. By the time confirmation arrives, historically, a meaningful portion of the recovery has already happened.
We looked at every bear market the S&P 500 has experienced since World War II, fourteen in total, including the COVID crash of 2020 and the inflation-driven decline of 2022, and examined what happened one month, three months, six months, and twelve months after each bottom.
S&P 500 Returns After Bear Market Bottoms
Total returns following the 14 historical lows included in Dunham’s analysis.
Figure 1: Bloomberg, Dunham, July 2026. Returns shown are total returns measured from the historical lows selected for this analysis. Market bottoms are identifiable only in hindsight. Gains from a low do not indicate when the index regained its previous peak. Past performance does not guarantee future results.
Across the 14 historical lows in this analysis, the S&P 500’s average total return was 18.86% after three months and 43.17% after one year. The median one-year return was 37.38%, with outcomes ranging from 15.30% to 77.80%.
But look closely at the two most recent bear markets.
Following the March 23, 2020 low, the S&P 500 delivered a 77.80% total return over the next year (a record) - and then following the October 12, 2022 low, its one-year total return was 23.67%.
Different bear markets are driven by different causes, yet the pattern holds that the market’s most painful moments have historically preceded some of its most rewarding ones.
That history brings us to two questions I ask investors. . .
Question Number One: Would You Rather Buy Low and Sell High?
It is a ridiculous question.
Every investor I have ever met wants to buy low and sell high. I would imagine that your clients do not sit down with you and say, “Actually, I would prefer to pay top dollar for my stocks and then, in fear, panic-sell them once they fall.”
And yet, if you have been in this business for any length of time, you already know that the truth is that an uncomfortable number of investors do precisely that. They buy at market tops because when markets are rising, greed is the motivating emotion, and it feels as though prices will keep rising forever.
When markets are going down, fear is the motivating emotion, and they feel as if the markets will be down forever. They sell at market bottoms because everything feels broken and the market downturn feels permanent.
It is not that they are foolish.
It is that they are human, and emotion is a poor portfolio manager.
Question Number Two: Do You Want to Take More Risk at the Top of the Market or at the Bottom?
Almost every investor, if being honest, would rather take market risk at the bottom of a cycle than at the top. Yet the irony is that risk actually feels the exact opposite of what it is at each point in the cycle.
At the top of the market, risk feels low. Prices are rising, headlines are optimistic, and portfolio statements look wonderful. But this is exactly when risk is highest, because valuations have become stretched and the price paid for future returns may become expensive. Taking on equity exposure at the top may mean paying a premium for uncertainty that has not yet been discounted into price.
At the bottom of the market, risk feels unbearable. Prices are falling, headlines are alarming, and portfolio statements look painful. But this is exactly when risk may be lowest, because the bad news may have already been largely priced in, valuations may have compressed, and the distance left to fall is likely smaller than the distance available to recover. Taking on equity exposure at the bottom may mean buying future returns at a discount.
The Paradox: Why Comfort and Risk Move in Opposite Directions
This is the paradox every investor eventually faces. The moment that feels safest is often the moment carrying the greatest risk, and the moment that feels most dangerous is often the moment carrying the greatest opportunity.
Comfort and risk move in opposite directions during a market cycle, which is exactly why so few investors succeed at timing it based on feelings alone.
In our view, the investor who has a rules-based program that takes risks at the bottom of the market rather than the top can now separate what a moment feels like from what a moment actually is and may have a better opportunity to add value to their portfolio.
How DunhamDC's Strategy Buys Fear and Sells Greed
This is the entire premise behind DunhamDC, and I want to walk you through why we believe it works, using real market history.
Early in my career, someone told me that markets go down in an elevator and up on an escalator. They suggested that declines feel fast and violent, while recoveries feel slow and grinding.
I agree with the first half of that statement completely. Markets absolutely go down in an elevator. But my research suggests the second half does not always hold true. At the bottom of a market cycle, markets do not always climb slowly on an escalator.
Often, they go up in the elevator too, particularly right after they hit bottom. Once you understand that, the entire logic behind DunhamDC becomes clear.
“Be fearful when others are greedy, and greedy when others are fearful.”
DunhamDC takes that idea and turns it into a disciplined, emotionless process rather than the courage an advisor or client must summon in the moment.
How Buying Fear and Selling Greed Works in Practice
As markets rise and investor emotions shift toward greed, DunhamDC systematically sells equities and moves into fixed income, guided by discipline, math, and rules rather than emotion.
As markets decline and emotions shift toward fear, DunhamDC systematically sells fixed income and buys equities, following that same disciplined, rules-based process.
The result is a portfolio that structurally owns fewer equities at market tops and more equities at market bottoms, without anyone having to make that call emotionally in real time.
Within DunhamDC, a 60% equity, 40% fixed-income investor can hold as little as 20% in equities near a market top and as much as 100% in equities near a market bottom.
We are not predicting the top or the bottom.
We are not forecasting what a Federal Reserve decision or a piece of geopolitical news will do to prices.
Based on that news or event, DunhamDC simply reacts to how the market has already moved, selling into strength and buying into weakness in a rule-based, systematic, and repeatable way.
What This Means for Your Next Client Conversation
Your clients experience market cycles through their own statements, their own fear, and their own greed, and that is why so few can execute a buy-low, sell-high strategy on their own. Intellectually knowing the right answer and living it emotionally are two entirely different things.
This is where you, as the financial advisor, matter more than any algorithm ever could. DunhamDC does not replace the conversation you have with your client at any point within a market cycle. What it does is to give that conversation a different meaning.
Instead of debating whether to hold on or sell, you can point to a rules-based process already doing the buying on their behalf, quietly and unemotionally.
The client does not have to trust their own courage at the moment. They only have to trust the process.
In our view, that is, in the end, the real value of a discipline like DunhamDC. It does not promise to predict the next bear market, nor to make the next decline feel comfortable.
Declines are never comfortable, and no strategy changes that.
What it offers instead is a way to ensure that, when the discomfort is at its peak, the portfolio does the opposite of what emotion would tell it to do.
Markets tend to move in cycles, often in large chunks, generally over short periods of time.
That part has historically never changed and likely never will. The only real variable is whether a portfolio is positioned to take advantage of that cycle or positioned to fall victim to it.
Every conversation you have with a client, in the end, is about which of those two outcomes they are actually choosing.
Frequently Asked Questions About S&P 500 Bear Market Recovery
How long does the S&P 500 take to recover from a bear market? Recovery time depends on the measure used. A rebound measures gains from the market low. A full recovery measures the time needed to regain the previous peak. Price returns and total returns including dividends can also produce different results. This article examines returns at fixed intervals after historical lows, rather than treating those gains as a timetable for full recovery.
Can investors identify a bear market bottom? Investors cannot know with certainty that a market has reached its final low. Bottoms become clear afterward, and rallies during a downturn can reverse. Historical returns measured from troughs therefore describe hindsight outcomes. An investment plan should account for further declines and changing cash needs instead of depending on buying at the exact bottom.
What is the risk of selling during a bear market? Selling reduces exposure to further declines, but it also creates a decision about reinvesting. An investor who remains out of the market during a rebound may miss gains. Whether selling is appropriate depends on liquidity needs, portfolio concentration, time horizon, and risk tolerance. A predefined plan can help make those decisions more consistent during volatile periods.
Does buying during a bear market guarantee better returns? No. Lower prices can create opportunities, but stocks may continue falling and individual companies may never recover. Increasing equity exposure also increases the portfolio’s sensitivity to further losses. Historical S&P 500 rebounds provide context, not a guarantee. Any decision to add equities should fit the investor’s financial needs and ability to remain invested.
Dunham - Buy Fear, Sell Greed: The Investment Strategy Billionaires Use - And How You Can Too [dunham.com]
Disclosures:
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
