The S&P 500 average drawdown is much larger than many investors expect, yet positive years have historically remained far more common than negative ones.

The S&P 500 Falls 14% in an Average Year. Most Years Still End in the Green.

Finance Investing by Marcus Thorne

A stock market chart can tell two completely different stories depending on where you stop reading it.

Take 2025. By early April, the S&P 500 was being dragged toward bear-market territory by the shock surrounding sweeping new US tariffs. The index fell almost 19% from its previous high. Volatility exploded, recession fears returned, trillions of dollars in market value disappeared and investors who had started the year expecting another relatively calm advance suddenly found themselves staring at one of the sharpest selloffs since the pandemic.

Then December arrived.

The S&P 500 finished 2025 up 16.39% on a price basis. Including reinvested dividends, its total return reached 17.88%.

Both numbers describe the same year.

That apparent contradiction becomes much less unusual when 2025 is placed beside the previous four and a half decades. J.P. Morgan Asset Management’s widely followed data on annual S&P 500 returns and intra-year declines covers the period from 1980 through 2025. Over those 46 calendar years, the index suffered an average maximum intra-year decline of 14.2%.

Yet 35 of those 46 years still finished with a positive price return.

The average annual price return across the period was 10.7%.

Those three numbers belong together because they describe something that long-term return charts tend to conceal: stocks have historically delivered attractive returns without providing anything resembling a smooth journey toward them.

The 10.7% is the destination averaged across decades. The 14.2% is part of what the road actually looked like.

Confusing the two can make ordinary market behavior feel extraordinary.

Table of contents

One chart captures the strange mathematics of investing

J.P. Morgan Asset Management publishes a chart that has become something of a classic in long-term investing circles. For every calendar year, a bar shows the S&P 500’s final price return while a separate marker shows the largest peak-to-trough decline suffered at some point during that year.

The visual effect is striking because the two datasets seem almost incompatible.

Positive annual returns appear again and again above the horizontal axis. Beneath them sit drawdowns of 5%, 10%, 15%, 20% and occasionally much worse.

Across the 46 calendar years from 1980 through 2025, J.P. Morgan calculates an average maximum intra-year decline of 14.2%. Despite those declines, the S&P 500 produced positive calendar-year price returns in 35 of the 46 years, or roughly 76% of the sample.

Its average annual price return over the same period was 10.7%.

There is an important methodological detail here. These are price returns, not total returns, so dividends are excluded. J.P. Morgan defines the intra-year decline as the largest peak-to-trough fall during each calendar year.

That distinction also corrects a common confusion surrounding 2025. The S&P 500’s 17.88% return that year includes dividends. Its price return — the figure comparable with the J.P. Morgan chart — was 16.39%.

The broader pattern remains the same either way.

A large temporary decline and a profitable year are not opposites.

They frequently inhabit the same twelve months.

What does a 14.2% average drawdown actually mean?

The phrase “the market falls 14% in an average year” is useful shorthand, but it needs to be handled carefully.

It does not mean the S&P 500 politely declines by approximately 14% every year before resuming its climb. Nor does it mean a market down 14% has somehow completed its statistically allotted correction and should therefore rebound.

The 14.2% figure is an average of the worst peak-to-trough decline recorded inside each calendar year across the 1980–2025 period.

Some years were considerably calmer. Others were brutal.

The difference matters because averages flatten radically different experiences into one convenient number. A relatively ordinary correction and the 2008 financial crisis can both contribute to the same historical average while representing completely different economic realities.

The statistic is therefore more useful as a description of how noisy equity investing has historically been than as a trading signal.

It tells us that substantial declines have been common.

It cannot tell us when the next decline stops.

How can the market fall 14% and still finish higher?

The apparent paradox disappears once we remember that drawdown and annual return measure different things.

Annual return compares two points: where the index began the calendar year and where it ended.

Maximum drawdown measures the worst decline from a previous peak during the journey.

Imagine an index beginning the year at 100, climbing to 120, falling to 102 and eventually finishing at 115.

The fall from 120 to 102 is a 15% drawdown. Yet the investor who held from the beginning of the year to the end still records a 15% annual gain.

Nothing contradictory happened. The two measurements simply answer different questions.

Real markets are obviously messier, but the principle is identical. An index can rise substantially, suffer a violent correction and recover before December 31. It can fall early and spend the rest of the year climbing. It can even experience several selloffs without finishing below where it started.

This is one reason annual performance tables make investing look much cleaner than living through it.

A row reading “+16%” contains no information about how terrifying the path to +16% may have felt.

2025 was almost a perfect demonstration

The S&P 500 entered 2025 after two exceptional years. It had gained 24.23% on a price basis in 2023 and another 23.31% in 2024.

Then the market ran directly into the tariff shock.

Following the announcement of sweeping US import tariffs in April, stocks plunged as investors attempted to price the consequences for corporate earnings, inflation, global trade and economic growth. Within days, trillions of dollars in market capitalization had disappeared.

The S&P 500 eventually suffered an intra-year drawdown of roughly 19%.

At the time, that decline did not feel like a historical data point destined to fit neatly into a chart. Markets were confronting a genuine policy shock whose economic consequences were uncertain. The VIX surged, recession probabilities rose and the index came close to the conventional 20% threshold associated with a bear market.

Yet the selloff did not define the full year.

Markets recovered, the S&P 500 returned to record territory and the index ultimately finished 2025 with a 16.39% price gain. With dividends reinvested, the total return reached 17.88%.

Looking backward compresses the entire episode into two numbers: -19% and +16%.

Living through it meant experiencing them months apart without knowing the second number in advance.

That difference is the whole problem.

Investors experience the drawdown, not the annual return

Long-term investing statistics are psychologically deceptive because they are usually presented from the future.

We know how the story ends.

A chart showing the S&P 500’s historical rise transforms recessions, wars, crashes, inflation shocks, banking failures, political crises and pandemics into temporary dents on an upward-sloping line. The uncertainty that existed at each moment disappears because the chart already contains what happened next.

Investors living through a drawdown have no such advantage.

When a portfolio is down 15%, the relevant question is not whether previous 15% declines eventually recovered. It is whether the current decline is another ordinary correction, the beginning of a recessionary bear market, or the opening phase of something considerably worse.

No chart can answer that in real time.

This is why volatility feels so different from historical volatility.

A past correction is a statistic.

A current correction is a question.

The J.P. Morgan data is valuable precisely because it restores some perspective to that uncertainty. A double-digit decline can feel like evidence that something has gone badly wrong with an investment plan, yet history shows that significant temporary losses have repeatedly occurred during years that ultimately produced gains.

That does not make the loss imaginary.

It makes the path of equity returns much rougher than their long-term average suggests.

A correction is not an anomaly

Financial media generally uses the term “correction” for a decline of at least 10% from a recent high.

The word can sound ominous because investors encounter it alongside red screens, falling portfolios and headlines attempting to explain why billions or trillions of dollars have vanished.

Historically, however, a 10% decline has not required an extraordinary economic catastrophe.

J.P. Morgan’s data makes that obvious. If the average maximum intra-year drawdown since 1980 has been 14.2%, then periods of meaningful market stress are not rare interruptions in an otherwise smooth process. They are embedded in the historical experience of owning equities.

This distinction matters because investors often imagine long-term returns without mentally budgeting for the volatility required to reach them.

A 10.7% average annual price return sounds attractive.

A portfolio periodically falling 10%, 15% or 20% sounds considerably less attractive.

Historically, investors in the S&P 500 received both.

The return did not arrive after volatility had been removed from the product. Volatility was part of the product.

The statistic can also be dangerously comforting

There is an obvious way to misuse all of this.

If the market has historically suffered a 14.2% average intra-year decline while finishing positive roughly three quarters of the time, an investor might conclude that every correction should simply be ignored because stocks always recover by December.

They do not.

Eleven of the 46 years in J.P. Morgan’s sample finished with negative price returns. Some were mildly disappointing. Others were devastating.

In 2008, the S&P 500 suffered a peak-to-trough intra-year collapse of roughly 49% and finished the calendar year down about 38% on a price basis. During the dot-com bust, the index recorded three consecutive negative calendar years from 2000 through 2002. In 2022, it finished down roughly 19%.

Averages do not provide protection against individual outcomes.

They also conceal sequence risk. A severe drawdown can be much more consequential for someone who needs to withdraw money than for an investor accumulating assets over several decades. Time horizon, diversification, liquidity needs and personal risk tolerance matter enormously.

The lesson of the 14.2% statistic is therefore not that declines are harmless.

It is that the existence of a decline alone tells you surprisingly little about where the calendar year will eventually finish.

Why this makes market timing so difficult

The chart also exposes one of the fundamental problems with attempting to escape every correction.

Selling after a significant decline requires one decision.

Getting back in requires another.

The second can be harder than the first because recoveries do not wait for uncertainty to disappear.

In 2025, an investor selling during the tariff panic would have needed to decide when the economic outlook had become sufficiently safe to return. By the time the environment felt comfortable again, markets could already have recovered a meaningful portion of their losses.

This pattern does not prove that selling is always wrong. There are circumstances in which reducing risk is entirely rational, particularly when a portfolio no longer matches an investor’s financial situation or tolerance for losses.

But using market fear itself as a timing mechanism creates an awkward asymmetry.

The moments that generate the strongest emotional impulse to leave are often the same moments when expected future returns have changed because prices have already fallen.

Historical data cannot tell investors whether today’s decline will reverse tomorrow, next month or several years from now.

It can tell them that waiting for markets to feel safe has never been a prerequisite for markets to rise.

Will the next 40 years look the same?

No one knows.

The 1980–2025 period contained falling and rising interest rates, recessions, the dot-com bubble, the global financial crisis, a pandemic, inflation shocks, wars, technological revolutions and extraordinary changes in the composition of the S&P 500.

The next four decades will contain their own collection of events that currently exist only as surprises waiting to happen.

There is no law requiring the S&P 500 to maintain a 10.7% average price return, no mechanism guaranteeing that roughly three quarters of calendar years must finish positive and certainly no rule preventing future drawdowns from exceeding 14.2%.

J.P. Morgan explicitly warns that past performance does not guarantee future results.

That caveat should not be treated as legal decoration. It is the intellectual boundary around the entire exercise.

History is useful because it tells us what markets have been capable of doing. It does not tell us what they owe us.

Still, the historical record leaves investors with a useful way of thinking about volatility.

If equities continue to generate positive long-term returns, they are unlikely to deliver them in a straight line. The uncomfortable months are not necessarily evidence that the long-term mechanism has stopped working, just as an average historical recovery is never proof that the current decline is harmless.

The extraordinary part of the J.P. Morgan chart is not that the S&P 500 has repeatedly fallen.

Markets are very good at falling.

It is that so many of those ugly red dots sit underneath positive years.

S&P 500 drawdowns: key questions

How much does the S&P 500 fall in an average year?

According to J.P. Morgan Asset Management, the S&P 500 experienced an average maximum intra-year decline of 14.2% between 1980 and 2025. The calculation measures the largest peak-to-trough decline within each calendar year.

How often did the S&P 500 still finish the year higher?

The index produced a positive calendar-year price return in 35 of the 46 years from 1980 through 2025, or approximately 76% of the period.

What was the average S&P 500 return over that period?

J.P. Morgan calculates an average annual price return of 10.7% from 1980 through 2025. The figure excludes dividends.

Did the S&P 500 return 17.88% in 2025?

Yes, but 17.88% was the S&P 500’s total return including dividends. The index itself gained 16.39% on a price basis, which is the appropriate figure to compare with J.P. Morgan’s historical price-return chart.

How far did the S&P 500 fall in 2025?

The index suffered an intra-year drawdown of roughly 19% during the tariff-driven selloff in the spring of 2025 before recovering and finishing the year substantially higher.

Does a 14% decline mean stocks are about to recover?

No. The 14.2% figure is a historical average, not a support level or forecasting tool. Individual drawdowns can be much smaller or dramatically larger, and some years finish with substantial losses.

Does this mean investors should never sell during a correction?

No. Investment decisions depend on time horizon, financial circumstances, diversification, liquidity needs and risk tolerance. The historical data simply demonstrates that large intra-year declines have frequently occurred during calendar years that eventually finished higher.

Is this financial advice?

No. This article explains historical S&P 500 market data and the mechanics of drawdowns. It does not recommend buying, selling or holding any security or investment product.

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