Looking Back, Moving Forward

By LaRue Gibson on July 10, 2025

William Shakespeare famously quipped “What Is Past Is Prologue.” Success in most endeavors, including investment markets, requires an understanding of historical antecedents and learning from their implications for the future. Perhaps you know the phrase “Those who fail to learn from history are destined to repeat it.” We prefer to apply what has come before to improve the probability of success and reduce the chances of failure. “This time is different” remain the four most dangerous words in investing. History, through statistical data, may improve opportunity as well as help to avoid disaster.

Implications For Forward Returns Following Strong Initial Market Recoveries

Analyzing the 16 Strongest Rebounds After a 15% or Greater Correction For Clues to Forward Performance Expectations

Source: www. Stooq.com

Executive Summary

This analysis examines the forward returns following strong 3-month (65-day) rebounds after 15% or greater market corrections in the S&P 500 Index. The study covers 16 major market corrections from 1957 to 2022 and reveals important patterns in market recovery dynamics. 65 trading days after the 2025 market correction  low yielded a +28% rebound, the 4^th strongest since 1957. How will this market perform in the 6-month and 12-month forward timeframes? Stay tuned!

Key Findings

• Negative correlation (-0.306) between 65-day baseline performance and subsequent 63-day forward returns
• Weaker initial rebounds (≤15%) show stronger subsequent 63-day performance (10.4% average)
• Correlation effect diminishes over longer time periods
• High success rates across all time periods (87.5% to 93.8%)

Performance Statistics

Source: www. Stooq.com

Investment Implications

• Market corrections with positive returns from their lows after 65 trading days have realized attractive positive 6-month and 12-month forward performance historically. Furthermore, markets with weaker initial rebounds may present better short-term opportunities
• Longer holding periods show higher average returns and success rates
• 65 trading days after market lows provides a more realistic entry point than trying to time the exact bottom if the market’s performance is positive

Analysis Methodology

65-Day Baseline Approach

This analysis examines S&P 500 performance following strong 3-month rebounds after 15% or greater market corrections. The methodology uses a 65-day baseline and measures forward returns at specific intervals.

Data Sources

• S&P 500 Index daily price data from Stooq.com (1957-2022)
• Performance calculated using percentage change in closing prices

The 16 Best 65-Day Recoveries After a 15% or Greater Correction

Bode Well for Forward 63, 125, and 250 trading days Performance

Correlation Analysis

Correlation Findings

Relationship between 65-day baseline performance and subsequent forward returns:

Key Insights

• Stronger initial rebounds may lead to more modest subsequent gains in the short term
• The negative correlation weakens over longer time periods
• By 125 days, correlation becomes negligible, suggesting independence

Group Analysis by 65-Day Performance

Note:

Weak rebounds (≤15%) show the strongest average forward returns at 63 days (10.4%), supporting the negative correlation finding.

Interpretation

The negative correlation suggests a potential “reversion to the mean” effect, where markets that rebound very strongly in the first 65 days may experience more modest gains in the subsequent 63 days.

Key Insights

Negative Correlation in Short Term

The analysis reveals a surprising negative correlation (-0.306) between the strength of the 65-day rebound and subsequent 63-day forward performance. This suggests a potential “reversion to the mean” effect, where markets that rebound very strongly in the first 65 days may experience more modest gains in the subsequent 63 days.

Weaker Rebounds Show Stronger Forward Returns

Markets with weaker initial rebounds (≤15%) show the strongest subsequent 63-day performance (10.4% average), significantly outperforming the strong rebound group (5.8% average) and moderate rebound group (3.8% average). This supports the negative correlation finding and suggests potential opportunities in markets that show more modest initial recoveries.

Correlation Diminishes Over Time

The negative correlation weakens over longer time periods, becoming negligible by 125 days (0.016) and remaining weak at 250 days (-0.171). This suggests that while initial rebound strength may influence short-term performance, its predictive value diminishes over longer time horizons.

High Success Rates Across All Time Periods

Despite the negative correlation in the short term, success rates remain high across all time periods (87.5% at 63 and 125 days, 93.8% at 250 days). This indicates that regardless of the strength of the initial 65-day rebound, forward returns are predominantly positive, especially over longer time horizons.

Long-Term Performance Convergence

By the 250-day mark, all rebound strength groups show strong positive returns (weak: 23.0%, moderate: 13.0%, strong: 22.1%), suggesting that markets tend to converge toward similar long-term performance regardless of initial rebound strength.

Top Performing Recoveries

Top 5 Performers by Total Return

Investment Implications

Strategic Approaches

Time Horizon Matters

Longer holding periods (250 days) show higher average returns and success rates. The negative correlation effect diminishes over time, suggesting that long-term investors can be less concerned with timing entry points.

Practical Entry Points

65 days after market lows provides a more realistic entry point than trying to time the exact bottom. Markets with weaker initial rebounds (≤15%) may present better short-term opportunities.

Risk Management

While most outcomes are positive, some volatility exists, particularly in shorter time frames. Diversification across entry points and time horizons can help manage the risk of negative returns.

Application to Current Market

Markets with more modest initial recoveries may present better short-term opportunities based on the historical negative correlation pattern, while all markets tend to show strong long-term performance regardless of initial rebound strength.

Data Sources & Methodology

Data Limitations

• Limited sample size (16 market corrections)
• Historical performance may not predict future results
• Analysis does not account for dividends or inflation
• Market conditions and structural factors vary across time periods

Detailed Methodology

Market Correction Identification

Identified 16 major market corrections of 15% or greater in the S&P 500 Index from 1957 to 2022. Each correction’s low point was determined as the starting point (Day 0) for subsequent measurements.

Baseline Performance Calculation

Calculated the 65-day baseline performance as the percentage change in the S&P 500 Index from the market low (Day 0) to 65 trading days later. This established the initial rebound strength for each correction.

Forward Return Calculation

Measured forward returns at three specific intervals from the 65-day baseline: 63 trading days (Day 65 to Day 128), 125 trading days (Day 65 to Day 190), and 250 trading days (Day 65 to Day 315).

Statistical Analysis

Calculated average returns, median returns, success rates, and correlation coefficients between the 65-day baseline performance and each forward return period.

Group Analysis

Segmented the 16 market corrections into three groups based on 65-day baseline performance strength: weak (≤15%), moderate (15-25%), and strong (>25%). Analyzed average forward returns for each group.

Important Disclosures

Investment and Market Risk:

The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. Any decision to invest should be made based on the investor’s investment objectives, risk tolerance, and financial situation, and in consultation with their financial advisor.

Past Performance:

Past performance is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Data Sources:

The data used in this presentation is believed to be from reliable sources, but LRG Wealth Advisors does not warrant its completeness or accuracy. The presentation of this data does not constitute a recommendation to buy, hold, or sell any securities.

Forward-Looking Statements:

This presentation may contain forward-looking statements that are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied.

Tax Considerations:

LRG Wealth Advisors does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Contact Information

LRG Wealth Advisors

📍 Address:

200 W Madison St, Suite 2610  

Chicago, IL 60606

📞 Phone: 

(312) 948-5100  

🌐 Website:

https://lrgwealthadvisors.hightoweradvisors.com/

About LRG Wealth Advisors

LRG Wealth Advisors is a team at Hightower Advisors, LLC, a registered investment advisor with the Securities and Exchange Commission (SEC). Advisory services are only offered to clients or prospective clients where LRG Wealth Advisors and its representatives are properly licensed or exempt from licensure.

Securities offered through Hightower Securities, LLC, Member FINRA/SIPC, Hightower Advisors, LLC is a SEC registered investment adviser.