The Stock Market Just Had One of Its Best Days Ever: Here's What History Says Comes Next.

Wednesday, April 9, 2025, will go down in stock market history. With a 9.5% rise, the S&P 500 (SNPINDEX: ^GSPC) posted its third-best day ever going back to the index's inception in 1957, putting one year's worth of gains into a single trading session. Stocks soared after the Trump administration backed down from aggressive tariffs against every country except China (although tariffs on imports from China are now a whopping 145%).

But the S&P 500 dropped the following day, and was up slightly on Friday. No one knows what the next few weeks will look like -- and the past doesn't predict the future -- but my bet is that the volatile markets will continue.

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While you might have cheered the massive up day in your portfolio, history says that more bleak days may be ahead. Here's why huge one-day rallies actually tend to be bearish indicators, not bullish, for the stock market.

Historical record on bear market rallies

Looking at the top 10 up days for the S&P 500, you'll notice they happened in 1987, 2008, and 2020. These massive up days all occurred in years with vicious bear markets. These are known as bear market rallies, and are a consistent theme throughout any stock market drawdown. Although we are not officially in a bear market for the S&P 500 as of this writing, the S&P 500 is close to hitting the 20% drop from a recent high that would trigger an official declaration. Violent upswings combined with big down days add up to stressful volatility -- the CBOE Volatility Index (VOLATILITYINDICES: ^VIX) is up 150% year to date in 2025 -- and can cause irrational decision-making.

While some bear market rallies signal the end of pain, most of the time it means we're in the middle of the whipsaw. A bear market lasts, on average, a little less than a year. I can't say for certain whether the market will hit new lows in 2025, but with the stock market drawdown beginning barely over a month ago, it looks more likely than not that more pain is ahead for the S&P 500 in 2025.

Why bear markets have huge up days

Now we know that bear markets have some of the biggest one-day rallies in market history. But why? Understanding this can help us all better manage our portfolios through market cycles, and know what's normal market behavior.

Bear market rallies come back to the reason a bear market starts in the first place: panic. Stocks usually don't fall for no reason. A narrative may start to build up on Wall Street, or a catalyst may arrive -- such as the Trump administration's tariff proposals on imports to the United States -- that will cause sharp cost increases for many publicly listed companies. Aggressive traders pounce on this narrative and start short-selling. If you are short a stock, you can make money if its price falls.

When any semblance of relief arises in the headlines -- such as Trump's pause on tariffs -- there can be a sharp reversal and heavy repositioning of portfolios as sentiment swings. Big stock drawdowns can increase volatility, which causes rash decision-making and rapid up-and-down bounces from day to day.

What smart are investors doing

If you look at the data, most investors start trading more frequently during a bear market. However, this usually just adds up to poor choices under high stress. The best thing to do might be the simplest: nothing. Stay the course, and keep dollar-cost-averaging into your portfolio if you've got money to invest, i.e., you've paid off high-interest debt, have a solid emergency fund, and won't need the money in the next few years.

Unlike professional traders with fixed investment accounts, individual investors may have more money to deposit into their accounts on a regular basis. Use this to your advantage and keep buying high-quality stocks that are now trading at a discount. If you have excess cash lying around, now may be the time to deploy it and buy some stocks on your watch list.

Consistency is the key to long-term returns in the stock market. It may not seem like it today, but the most profitable decisions you make will be during bear markets. And they likely won't come from foolishly day trading around bear market rallies. Keep your time horizon long while the rest of the market is worried about the next tariff announcement.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.