After sharp market pullbacks like the one we’ve just experienced, it’s common for investors to feel frozen and uncertain whether to act and/or how to act. It leaves some big questions. Has the market bottomed? Should I focus on the beaten-down stocks in hopes of a rebound, or stick with the ones that held up well as a sign of underlying strength? The data I’ve gathered below might give us some confidence in how to proceed and help us get over the paralysis
My goal is to find similar market pullbacks and then find which stocks performed the best going forward based on whether they were underperformers or outperformers during the downturn. When I ran the numbers the S&P 500 Index (SPX) was about 15% off the high which occurred about two months ago. I went back ten years, and I found three separate times the SPX sat about 15% below the prior all-time high which had occurred about two months prior. Using current S&P 500 stocks, I found the 50 best and 50 worst performing stocks during each pullback then tracked how they did going forward. For those curious, below are the dates of the pullbacks I used.
The table below shows the performance of the stocks that did the best and worst during the previously mentioned pullbacks. There is a very clear winner here. The stocks that were most beaten down during the prior couple of months performed best over the next month. Those beaten down stocks averaged a return of almost 11% over the next month with 85% of them positive and an impressive 72% beating the SPX over the next month. The stocks that held up the best during the broad market pullback averaged a return of 2.17% over the next month and a measly 23% of them beating the SPX.
Next, I have three tables which break down the data above by each individual pullback. The first table shows the data for the 2018 pullback (see above for the specific dates of the pullbacks), the second table shows the 2020 pullback then the last table shows the data for the pullback in 2022. The worst performers during the pullback crushed the best performers over the next month in all three of those instances.
Getting a list of stocks to target is straightforward. The list of stocks below is simply the 50 worst performing S&P 500 stocks since February 19, 2025. That’s the date of the most recent all-time high for the SPX. Based on the analysis above, it’s the worst performing stocks since the top of the market that do the best over the next month.
