The simple math showing the stock market’s ‘asymmetric upside’

Core Insights - The article emphasizes the mathematical relationship between investment losses and the required gains to return to breakeven, illustrating that a 20% loss necessitates a 25% gain to recover [1][2] - Historical data shows that while the stock market can be volatile, it has a strong tendency to recover from losses, with significant gains often following bear markets [3][4] Historical Performance - The 2022 bear market resulted in a 24% decline, requiring a 32% gain to break even, but the market achieved a total return of 78% before the subsequent downturn [6] - The 2020 pandemic crash saw a 34% drop in the S&P 500, necessitating a 52% return to recover, which was surpassed with a 120% return [6] - The global financial crisis starting in 2007 led to a 55% decline, requiring a 122% return to break even, yet the market experienced an 11-year bull run with a total return of 527% [6] - On average, bear markets see a decline of 31%, requiring a 45% return to recover, while bull markets have historically provided an average return of 254% before the next bear market [6]