The S&P 500 Just Did Something That's Happened Only 24 Times in 75 Years -- and It Has a 91% Success Rate of Forecasting Which Direction Stocks Will Move Next

Over the long run, no asset class has come close to matching stocks in terms of average annual return. But getting from Point A to B on Wall Street can sometimes be an adventure.

Over the previous two weeks, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and innovation-inspired Nasdaq Composite (NASDAQINDEX: ^IXIC) were whipsawed. All three indexes recorded some of their largest single-session nominal point gains and losses in the span of a few days. For instance, the S&P 500 registered its fifth-largest two-day decline in history on April 3 and April 4 (-10.5%), as well as its biggest single-session point gain (+474.13), and eighth-largest percentage increase on April 9 (+9.52%).

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While historic volatility tends to incite fear and uncertainty on Wall Street, it can also pave the way for phenomenal investment opportunities. Based on a rare correlative event that just occurred in the benchmark S&P 500, the time for investors to pounce may have arrived.

Image source: Getty Images.

What's causing the stock market's historic volatility?

Some investors might be wondering what's precipitated one of the wildest stretches we've witnessed from the stock market this century. One answer is most-definitely President Donald Trump's tariff policy.

On April 2nd, which Trump dubbed as "Liberation Day" for America, he introduced a sweeping 10% global tariff, along with a host of reciprocal tariffs that are higher for countries that have persistently held adverse trade imbalances with the U.S.

A week later, on April 9, the president announced a 90-day pause on these reciprocal tariffs, with the exception of China. In fact, tariffs between the U.S. and the world's No. 2 economy have only escalated since Liberation Day.

The ongoing uncertainty of President Trump altering tariff levels, as well as which countries tariffs are applicable to, is clearly upsetting investors and undermining their ability to look to the future.

Additionally, a lack of differentiation by the Trump administration between input and output tariffs runs the risk of increasing the price for U.S. goods and pushing up the prevailing rate of inflation at a time when U.S. economic growth prospects for the first quarter are tanking.

But it's not just tariffs that have investors spooked. The stock market entered 2025 at the third-highest valuation premium dating back 154 years, based on the S&P 500's Shiller price-to-earnings (P/E) Ratio (this valuation tool is also known as the cyclically adjusted P/E Ratio, or CAPE Ratio). The previous five occurrences where the Shiller P/E topped 30 since January 1871 eventually resulted in the Dow Jones, S&P 500, and/or Nasdaq Composite losing at least 20% of their value.

Treasury bond (T-Bond) yields are also telling a worrisome tale. Last week, the yield on the 30-year T-Bond rose at the fastest clip we've witnessed in more than four decades, according to UBS economist Paul Donovan. Rising yields make it less desirable for consumers and businesses to borrow money, which in turn can slow economic growth. At the same time, tariffs run the risk of increasing the prevailing rate of inflation.

Long story short, there's no immediate solution to any of these concerns, which suggests volatility may become the new norm for the weeks and months that lie ahead.

Image source: Getty Images.

The S&P 500 just did something extremely rare -- and it's fantastic news for optimistic investors

When the Dow Jones, S&P 500, and Nasdaq Composite vacillate wildly, it's not uncommon for investors to seek out forecasting tools, data points, or correlative events that can help predict the future. Although nothing is ever guaranteed in the stock market, some of these events do have a high probability of repeating.

As noted, April 9 marked one of the best days in history for the broad-based S&P 500. The index's 9.52% increase was just the 24th time since the start of 1950 that it had gained at least 5% in a single session.

As you can imagine, investors often take some time to digest moves of this magnitude. According to data aggregated by Carson Investment Research via FactSet, and published to social media platform X by Carson Group's Chief Market Strategist Ryan Detrick, the S&P 500 fell 65% of the time (15 out of 23 instances) the following day. Since Detrick's post came prior to the closing bell on April 10, and the S&P 500 did end the subsequent day lower, two-thirds of all next-days following a 5% gain have now been negative.

It's somewhat of a similar story for the five days following one of these outsized gains. Only 39% (9 out of 23) of the time has the S&P 500 added to its gains a week after a single-day increase of at least 5%.

Some weakness the day after, and out to a week after, some of the best days ever is pretty normal. pic.twitter.com/rJq1zEQJKb

-- Ryan Detrick, CMT (@RyanDetrick) April 10, 2025

But as you'll note in Detrick's data set, widening the lens, allying with time, and gaining perspective completely changes the picture.

In the 12 months following the previous 23 instances where the S&P 500 increased by at least 5% in a single session, the S&P 500 was higher 91% of the time (21 out of 23). The two exceptions being during the heart of the dot-com bubble and shortly after the Great Recession.

Something else worth noting is that the S&P 500 typically soared in the year following these outsized single-day gains. Even including the two down years, the average gain 12 months later following these 23 rare supersized gains was 26.9%. For context, the benchmark S&P 500 has risen by around 10% annually since 1957. This means supercharged return days for the S&P 500 have historically been a precursor for outsized returns over the coming year.

To reiterate, there's no guarantee the S&P 500 is going to deliver a nearly 27% return over the next year, or for that matter even be higher than where it closed on April 9. But when examined over more than a century, the S&P 500 hasn't had a single rolling 20-year period where it's generated a negative total return, including dividends.

Regardless of what causes tumult on Wall Street, stock market corrections, bear markets, and crashes consistently represent a buying opportunity for patient investors.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.