The U.S.-Israeli military campaign against Iran — which began in late February — has set off a chain of events that markets are still working through. At the center of it is geography: Iran has effectively closed the Strait of Hormuz, the narrow waterway through which roughly 20% of the world’s daily oil supply passes. It is the first time in history the strait has been functionally shut down, and the economic implications are significant — rippling through energy prices, inflation expectations, shipping costs, and global supply chains.1
Markets reacted sharply. Oil prices surged, the S&P 500 sold off on fears of an inflation resurgence, and investor anxiety spiked to levels not seen in some time. A partial recovery followed as signals emerged that the conflict may be shorter in duration than initially feared — but uncertainty remains elevated, and that is unlikely to change quickly.
In moments like this, the instinct to move to cash or reduce risk feels not just reasonable, but responsible. We understand that. What the long-term data shows, however, is that acting on that instinct is often the costliest mistake an investor can make.
Declines are normal. Even during positive years.
The chart below covers 46 years of market history — crashes, recessions, wars, and pandemics. The red dots mark the scariest intra-year drops. The gray bars are what actually happened by year-end. Despite average intra-year drops of 14.2%, the market finished positive in 35 of those 46 years.
S&P 500 Intra-Year Declines vs. Calendar Year Returns. Returns based on price index only and do not include dividends. Intra-year drops refer to the largest market drops from peak to trough during the year. For illustrative purposes only. Calendar year returns shown 1980–2024; average annual return over this period was 10.6%. 2
This year’s current pullback is uncomfortable — but it fits squarely within the historical norm. Annual corrections of 14% on average still lead to positive yearly returns about 75% of the time — including a 10% drop in 2023 and an 8% drop in 2024, both of which ended higher.2
Volatility happens more than you think.
What we’re experiencing right now isn’t an anomaly — it’s a normal part of investing. The table below shows just how frequently market declines of every size have occurred historically.3
Average frequency of S&P 500 declines by severity. For illustrative purposes only. Past performance is no guarantee of future results. 3
Knowing this going in makes it much easier to stay the course when it happens. A 10% correction is not a catastrophe — it’s a historically common occurrence that long-term investors have navigated many times before.
Missing the best days is costly.
The chart below makes the stakes concrete. A $10,000 investment left fully invested over time grew to $71,750 — a +10.35% annualized return. Miss just the 10 best days? You’re left with $32,871. Miss 50 of them and you’ve actually lost money on your original investment.4
Growth of $10,000 investment based on S&P 500 historical returns. For illustrative purposes only and does not represent an actual investment or the performance of any specific investment. An investor cannot invest directly in an index. 4
The brutal irony: those best days almost always cluster around the worst ones — research shows the worst days tended to happen just before the best days, meaning investors who sell during periods of fear are among the most likely to miss the subsequent recovery.3 As the chart above shows, missing even a handful of those days has historically had a significant impact on long-term outcomes.
Stay the course.
Volatility is the price of admission for long-term returns. The headlines are loud right now — but a well-constructed, diversified long-term plan is designed to weather periods of uncertainty like this one.
If you’d like to talk through how your portfolio is positioned for moments like this, we’re here.
Sources
1 The Motley Fool. “How Will the Conflict in Iran Impact the Stock Market?” March 2026.
2 FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Guide to the Markets — U.S. Data as of February 28, 2025.
3 Carson Group / Ryan Detrick, CMT, Chief Market Strategist. Data from Ned Davis Research. Based on S&P 500 historical frequency analysis.
4 Franklin Templeton. Illustrative analysis based on S&P 500 historical data. Past performance is no guarantee of future results. Unmanaged index returns do not reflect any fees, expenses, or sales charges. Dividends are subject to reinvestment.
Disclosures
The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities, or services. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information. Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives.