Since 2000, the S&P 500 has endured four bear markets. Historical data show that longer holding periods have lowered the odds of an inflation-adjusted loss, even as AI spending and high valuations draw scrutiny.
A fresh S&P 500 high does not rule out a correction or bear market. The historical case for investing rests less on predicting the next downturn than on how long an investor can stay invested.
That distinction matters as concerns about valuations and the broader economy meet questions about artificial intelligence. Some of the world's largest companies are committing hundreds of billions of dollars to AI. Its ultimate capabilities remain uncertain, as does whether that spending will generate adequate returns. Should expectations disappoint, stocks could sell off sharply. Reuters reported in October 2026 that analysts expected S&P 500 companies' profits to grow by more than 35% for the year, with investment in data centers among the drivers. Oxford Economics estimated that AI-related activity accounted for about one-third of recent U.S. economic growth, including infrastructure investment and a stock-market wealth effect. Meanwhile, the ten largest companies represented about 40% of the S&P 500, up from roughly 28% in October 2022, according to Reuters' market report.
In October, the International Monetary Fund warned that disappointment in AI productivity or profitability could trigger a sharp pullback in investment and asset prices. In a stress scenario, the IMF estimated that global GDP could be 1.1% lower by 2028, with U.S. output down 1.8%. Falling equity values could make debt harder to service. Future revenue commitments may also fail to materialize. A drop in stock prices could reduce household demand through a wealth effect, Reuters reported in its coverage of the IMF warning.
Risk remains
History offers no smooth climb. A market correction is generally a decline of at least 10% from a recent high; a bear market is a fall of at least 20%. A Charles Schwab report counted 27 corrections since 1974. Six became bear markets. Pullbacks have been frequent, while deeper declines have occurred less often and remain part of investing.
The same report found that bear markets lasted an average of 409 days and brought an average decline of 36%. Those figures describe past episodes, not a timetable or a floor for the next decline. A downturn could last longer or fall further. It could also stem from conditions unlike those in earlier cycles.
Corrections can strip away some of the optimism built into prices, but they are painful and difficult to time. Investors who sell during a sharp drop may miss a recovery. Those who need their money soon may not have the flexibility to wait.
Valuations and expectations
Valuations deserve attention, but they do not provide a calendar for a crash. The S&P 500's Shiller CAPE has climbed above 40, a level last reached before the dot-com crash. In early October 2026, estimates put the ratio at about 41.6, compared with a historical average of roughly 17.4 and a December 1999 record of 44.19. The measure cannot predict when a downturn will begin. An earlier valuation analysis explains how that reading can inform exposure decisions without serving as a timing signal.
AI adds another layer of uncertainty. The bull-market thesis depends in part on companies turning heavy investment into lasting business value. On October 13, 2026, the Dow Jones Industrial Average fell 0.35%, the S&P 500 slipped 0.02% and the Nasdaq Composite lost 0.15%, Reuters reported, as investors weighed whether major technology companies could justify their AI spending. The market was watching upcoming results and capital-spending plans from major cloud and technology companies for evidence that infrastructure outlays could translate into revenue. If adoption or returns fall short of expectations, stocks priced for strong growth could come under pressure. That remains a risk scenario, not a confirmed outcome, and it does not establish that the entire market is destined to fall.
Time changes the odds
Since 2000, the S&P 500 has gone through four bear markets. The dot-com bust and the Great Recession were two. The COVID-19 pandemic brought a third. The fourth came in 2022, during the Federal Reserve's aggressive interest-rate increases. Since its 1957 inception, the S&P 500 has returned about 10% a year on average; over the past 40 years, its average annual return has been 11.5%. These figures describe historical performance, not a forecast or a guaranteed investor return.
Long-term results help explain why professional money managers use the S&P 500 as a benchmark. Even managers with extensive experience and funds that charge high fees do not consistently beat the broad market as a matter of course. An index fund can provide broad exposure, but it still carries stock-market risk and will fall when the market falls.
A 2020 Schroders study found that an investor holding the S&P 500 for just one month lost money 40% of the time in inflation-adjusted terms. The reported odds fell to 20% over five years and about 10% over 10 years. Over 20 years, the study found almost no chance of an inflation-adjusted loss. These are historical results. They do not rule out losses over any particular holding period.
Investing without a forecast
For someone with a long time horizon, dollar-cost averaging can spread the risk of investing a lump sum at an uncomfortable moment. The method means investing a set amount at regular intervals. Purchases then span different market prices, which can reduce the effect of choosing a single entry point. It does not prevent losses or ensure a profit, and it may produce a different result from investing the full amount earlier.
The right pace depends on when the money may be needed and how much loss the investor can withstand. Near-term expenses also need to be covered. A five-year holding period is a useful horizon described in the source material, not a guarantee that an investment will recover by then. Money needed sooner may not be suited to stock-market volatility.
Dollar-cost averaging changes the timing of purchases, not the risk of the asset. Regular contributions buy more shares when prices are lower and fewer when prices are higher, but an account can still decline if prices keep falling. Investors using the approach still need to consider fees. They also need to weigh diversification and whether their chosen holdings match their goals and tolerance for loss.
