The S&P 500 just did something it hasn’t done since March 2025 — it broke below its 200-day moving average. For the uninitiated, that’s the line technicians treat like a dividing wall between bull markets and bear markets. And when the index falls below it, history gets uncomfortable.
Over the past decade, the S&P 500 has dropped below this key level 28 times. The average peak-to-trough decline in the 12 months following? A stomach-churning 17%. With the index already sitting about 6% off its January high of 6,797, that math puts the potential floor somewhere near 5,642 — roughly 13% below current levels.
The culprits are piling up. Oil prices have been elevated as the U.S.-Iran conflict disrupted global energy flows. Tariff uncertainty has slowed GDP growth. The VIX — Wall Street’s fear gauge — topped 30 for the first time in weeks. And looming midterm elections historically create their own turbulence, with the S&P 500 averaging an 18% peak-to-trough decline during midterm years.
But here’s where it gets interesting. On Monday morning, President Trump posted that the U.S. and Iran have had “very good and productive conversations” toward a resolution. He ordered a five-day pause on strikes against Iranian energy infrastructure. Oil immediately cratered — Brent crude plunged from $114 to $101 in minutes. The S&P 500 surged over 2%, the Dow ripped more than 1,000 points higher, and gold fell nearly $93.
The question now: is this the beginning of a recovery or a classic head-fake? Iran’s state media claims there’s been no contact with Trump, which adds a layer of uncertainty. Conflicting signals are the market’s least favorite thing.
Here’s what history actually suggests: following those 28 bearish breakdowns in the last decade, the S&P 500 returned an average of 16% over the next 12 months. The six months after midterm elections are historically the strongest stretch of the entire presidential cycle, averaging 14% returns. In other words, the pain tends to be temporary, and the snapback tends to be violent.
The smart play isn’t panic-selling, and it isn’t going all-in today either. It’s readying cash, staying disciplined, and remembering what Warren Buffett said: “Be fearful when others are greedy, and greedy when others are fearful.” Right now, there’s plenty of fear to go around — and historically, that’s been one of the best buying signals there is.
