Will Stocks Rebound Today, Or Do You Have A Plan?
Follow the whole story: every piece in this series is on our AI storyline page.
Will stocks rebound today? It’s the question in every inbox this morning, and it deserves a straight answer, so we’ll give you one, with data. But here’s what the pros are really working on after a day like this: not where the market opens today, but whether their plan already says what to do next. We’ll come back to that, with a one-page plan you can write this weekend.
“A good plan works on bad days too.” – Anonymous
What Does Everyone Already Know?
Thursday hurt. The S&P 500 fund (SPY) fell 4.4% to $733.00, and the Nasdaq-100 fund (QQQ) 6.5%. Nvidia closed at $181.60.
It was the AI trade unwinding: the chip makers and the companies building the power and data centers behind AI fell hardest. The worry has been building for weeks. Power is the bottleneck, opposition to new data centers is growing town by town, and the new Congress can lean on both; on Wednesday, Meta’s president told a Wall Street Journal conference that the midterm results will make building data centers harder. We flagged power as the AI trade’s real risk on Nov 2, in Nvidia Stock’s Real Risk Isn’t China. It’s Power.
Here’s the part most people miss: if you own an S&P 500 fund, you owned Thursday’s AI trade too. Seven companies make up about a third of SPY (State Street, as of Nov 4).
| Inside SPY | Share of fund | Thursday | Below 52-wk high |
|---|---|---|---|
| Apple | 7.7% | −1.5% | −2% |
| Nvidia | 7.3% | −9.3% | −24% |
| Microsoft | 6.2% | −3.6% | −4% |
| Alphabet | 4.6% | −2.2% | −30% |
| Amazon | 3.9% | −2.2% | −8% |
| Broadcom | 2.3% | −10.4% | −39% |
| Meta | 2.1% | −4.0% | −22% |
Nvidia and Broadcom are about a tenth of the fund, and they took nearly one point of SPY’s 4.4-point fall by themselves.
The quiet corners did their job. Gold and long Treasuries edged up, and the dividend fund SCHD lost about half as much as SPY. Apple, the fund’s biggest holding, fell only 1.5%.
So, Will Stocks Rebound Today?
Honestly? Nobody knows, and the record says it’s close to a coin toss. We looked at every day since the end of 2002 when the S&P 500 fell at least 3.5% and the Nasdaq Composite at least 5% on the same day. There were 21 before Thursday. We laid out all of them in what happened the last 21 times the Nasdaq fell 5% in a day. Here’s the short version for the S&P 500, price only:
| Later | Higher | Median | Range |
|---|---|---|---|
| 1 week | 10 of 21 | −1.2% | −13.1% to +19.1% |
| 3 months | 12 of 21 | +2.8% | worst −21.4% |
| 12 months | 20 of 21 | +27.0% | worst −4.1% |
The next week was a coin flip with a wide swing. The next year was not.
So the honest answer to “rebound today?” is: maybe, maybe not, and a week later stocks were lower more often than higher. Three months on it was barely better than even, and the worst case, after September 29, 2008, was another big leg down. These days also come in bunches: 11 of the 21 fell in 2008-09, and four in 2020.
A wider net tells the same story. Since 2005, SPY has had 18 dips of 5% or more inside 60 trading days. In the year after the typical one, it rallied 16% at its best point, and also fell another 8% at its worst. Both happened. A plan has to be ready for both.
How Low Did It Go Last Time, And How Long Did It Take?
A plan has to survive the bad case, so here’s the bad case: the last three bear markets, measured on month-end prices with dividends, for SPY alone and for a 60/40 mix of SPY and the bond fund AGG.
| Bear market | S&P 500 fund | 60/40 mix |
|---|---|---|
| 2008-09 | −51%, back in 37 months | −32%, back in 22 months |
| 2020 | −19%, back in 4 months | −12%, back in 3 months |
| 2022 | −24%, back in 15 months | −20%, back in 17 months |
“Back in” counts from the low to the old high. Two of the three recoveries took more than a year; one took about three years.
Two things jump out. A 60/40 mix took the edge off 2008 and 2020, and barely helped in 2022, when bonds fell too; we dig into why in Is 60/40 Dead?, coming next. And the long recoveries are why the cash line on your plan matters more than any forecast.
What’s The Bigger Number?
Look past the next few months and the picture gets much calmer. A year after those 21 days, the S&P 500 was higher 20 times, with a median gain of 27%. Five years later, for the 18 days old enough to measure, it was higher every time, and the median roughly doubled. That’s where we’d point your attention: year end is noise, 2027 has leaned your way in this data, and the next five to ten years are what your money is actually for.
That’s a measured history, not a promise. It’s price only, it starts after the 2000-2002 dot-com fall, and the 21 days are really five or six episodes.
What Goes On Your One-Page Plan?
Four lines. Write them down this weekend, while the market is closed and the headlines are quiet.
1. Your target mix. Say it as a number: for example, 60% stocks and 40% bonds and cash. On Thursday a mix like that, held in SPY and AGG, would have lost a bit more than half as much as SPY. If 60% feels like too much right now, that’s news about your mix, not the market.
2. Your rebalance band. Pick how far the mix may drift before you act, say 5 points. With a 60/40 mix, stocks would have to fall about 18% before the stock share drops to 55% and the band tells you to buy back to 60%. Until then you do nothing, and you don’t have to decide anything at 9:30 am.
3. What you do after another 10% fall. Another 10% would put SPY near $660. A week after two of the 21 days, the index was already 10% or more lower. Decide now: buy a set amount from cash, move up your rebalance, or simply hold. Any of them is fine if it’s written down. Our crash-and-rally plan sets out what to buy at −10% and −20% and what to trim at +20%.
4. Your cash rule. Keep the money you’ll need in the next year or two out of stocks, in cash or short-term Treasuries. Look at the recovery table again: a year or two of cash would have carried you through 2020 and 2022 without selling a share; 2008 took longer for stocks alone, which is where the bond side earns its place. Plenty of investors went the other way this fall: in the past month about $4.7 billion left two big T-bill funds, BIL and SHV, while about $20.8 billion went into the S&P 500 fund VOO. Nothing wrong with that, as long as next year’s spending wasn’t part of it.
What this replaces: selling after a 5% day, or betting the bounce by buying everything at once. The risk: if this turns into a 2008-style stretch, a plan still loses money for a while; it just means you won’t sell at the bottom or freeze when your band says buy.
What Are The Pros Watching?
Three things, and none of them is Friday’s open. Whether more 5% days follow in a cluster, the way they did in 2008 and 2020. Whether the selling spreads from the chip makers to the companies that pay for AI: on Thursday Microsoft, Alphabet, Amazon and Meta fell far less than Nvidia and Broadcom, and they’re still growing revenue 12% to 26% a year. And Nvidia’s quarterly report later this month. Each is a reason to check your plan. None is a reason to tear it up.
What’s The Bigger Idea?
We call it Plan, don’t react. A market can’t promise you a good week. A plan can promise you won’t make the worst move on the worst day. The people who did best after the 21 days in our table weren’t the ones who called the bottom; they were the ones still holding a year later, when the index was higher 20 times out of 21.
Today is a coin flip; your plan isn’t. After the 21 earlier days like Thursday, the S&P 500 was higher a week later only 10 times, but a year later 20 times, median +27% (price only). The last three bear markets took 4 to 37 months to recover for stocks alone. Write down your target mix, your rebalance band, what you do after another 10% fall and your cash rule, then let the plan, not the headlines, make Friday’s decision.
What Should You Ask Next?
- Is 60/40 dead? Why bonds helped in 2008 and not in 2022, and what held up in both.
Follow this story with us: we’ll keep the table current and come back to what changed, and what didn’t, for a long-run plan.
Does Your Plan Already Say What To Do Next?
Rough days are when a plan earns its keep. If you have $1 million or more invested, get a second opinion from a Trefis expert partner advisor in a free 15-minute call, or let Invest With Trefis build and run the plan for you.
For questions about this article or underlying research, email help@trefis.com.