Who Should You Call When The Market Drops 5%?
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Who should you call when the market drops 5%? It’s a fair question, and a good instinct: talking it through beats acting alone at 3:55 pm. We’ll answer it plainly, with the numbers worth having in front of you. But here’s what the people who stay calm on days like this do differently: they made the call months ago, and Thursday’s call is just a check-in on a plan that already exists. We’ll come back to how to set that up before year end.
“Plan, don’t react.” – Anonymous
What Happened On Thursday?
The S&P 500 fund (SPY) fell 4.41% to $733.00. The Nasdaq-100 fund (QQQ) fell 6.5%, and Nvidia fell about 9.3% to $181.60. The dividend fund SCHD fell 2.18%.
It was the AI trade unwinding: the chip makers and the companies building the power and data centers behind AI fell hardest. 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. Knowing why doesn’t make a 4% day feel any better, which is exactly when a call with someone who knows your plan helps most.
So, Who Should You Call?
Someone who knows three things about you before you say a word: what your money is for, how much of it you’ll need in the next year or two, and what you agreed to do when stocks fall. For most people with a sizable portfolio, that’s a financial advisor you already talk to on a schedule. If you don’t have one, it’s a good week to get a second opinion from one.
Who not to act on: anyone whose answer doesn’t depend on your plan. A friend with a hot take, a group chat, a headline. They can tell you how they feel about Thursday. They can’t tell you whether Thursday changes anything for you.
And the honest truth about the call itself: nobody on the other end knows where the market goes next. The value isn’t a forecast. It’s a second set of eyes, with the numbers, on four decisions you’d otherwise make alone on a bad day.
What Do The Last 21 Days Like This Say?
Between the end of 2002 and Thursday there were 21 days when the S&P 500 fell at least 3.5% and the Nasdaq Composite at least 5% on the same day. Here’s what the S&P 500 did next, price only:
| Later | Higher | Median | Worst |
|---|---|---|---|
| 1 week | 10 of 21 | −1.2% | −13.1% |
| 3 months | 12 of 21 | +2.8% | −21.4% |
| 12 months | 20 of 21 | +27% | −4.1% |
The next few months were close to a coin flip. The next year mostly wasn’t.
Widen it to all 83 days when the S&P 500 fell 3% or the Nasdaq 4.5%, and the index was higher a year later 71 times, with a median gain of 23%. The full list is in what happened the last 21 times the Nasdaq fell 5% in a day.
Here’s the illustration that matters for the phone call. Someone with $1 million in an S&P 500 fund who sold at the close on one of the 21 days and stayed out for a year would, at the median, have missed about $270,000 of gains. That’s history, price only, not a promise. These days cluster: 11 of the 21 came in 2008-09.
How Low Can It Go, And How Long Did It Take To Come Back?
A good advisor will also put the bad case on the table, because your plan has to survive it. Here’s how far the S&P 500 fund fell in the last three bear markets, on daily closes with dividends, and when it got back to its old high:
| Selloff | Fall | Bottom | Back to peak |
|---|---|---|---|
| 2008-09 | −55.2% | Mar 2009 | Aug 2012 |
| 2020 | −33.7% | Mar 2020 | Aug 2020 |
| 2022 | −24.5% | Oct 2022 | Dec 2023 |
Recoveries ranged from under five months to almost three and a half years after the bottom.
Put those in today’s prices. Measured from Thursday’s close of $733.00, a 2022-size fall would mean SPY near $553, and a 2008-size fall near $328. Neither is a forecast. They’re the two numbers to ask yourself about on the call: if my balance fell by a quarter, or by half, would my plan still work, and would I still be holding?
Smaller dips are far more common. Since 2005, SPY had 18 dips of 5% or more within 60 trading days; in the year after, the median dip fell a further 8.4% at its worst and gained 16% at its best. A good plan expects both.
What Does A Second Opinion Cover On A Day Like This?
Four things, and none of them is “should I sell everything.”
1. An exposure check. What do you really own? An S&P 500 fund isn’t as spread out as it sounds. Its top 10 holdings are 37.5% of the fund (State Street, as of Nov 4), and on Thursday seven of them did about a third of the damage:
| Stock | Share of SPY | Thursday | Points of SPY’s drop |
|---|---|---|---|
| Nvidia | 7.3% | −9.3% | 0.68 |
| Broadcom | 2.3% | −10.4% | 0.24 |
| Microsoft | 6.2% | −3.6% | 0.22 |
| Apple | 7.7% | −1.5% | 0.12 |
| Alphabet | 4.6% | −2.2% | 0.10 |
| Amazon + Meta | 6.0% | −2.2%, −4.0% | 0.17 |
| Seven together | 34.2% | 1.52 of 4.41 |
Two chip makers, about a tenth of the fund, supplied about a fifth of its fall.
If you also own Nvidia directly, or a tech fund, Thursday’s chip selloff hit you more than once. And Nvidia’s own history says the swings can get much bigger: it fell 85% in 2007-08 and took until 2016 to get back, and fell 63% in 2022 before recovering in May 2023. We added up what that kind of overlap can cost in The $1.5 Million Risk In AI-Heavy Portfolios. An advisor can add it up across every account in one sitting.
2. Your rebalancing rule. If your plan says “60% stocks, rebalance when it drifts 5 points,” the question on Thursday is simple: has it drifted? After one day the answer is usually no, and the plan says do nothing. For a 60/40 mix, stocks would have to fall about 18% before the band says buy.
3. Tax-loss harvesting before December 31. If something in a taxable account is below what you paid, selling it can bank a loss that offsets gains, and up to $3,000 a year of ordinary income ($1,500 if married filing separately). The wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after. This is one of the few things a bad day can hand you, and it’s worth doing with someone who knows your full tax picture.
4. Cash needs for 2027. Money you’ll spend in the next year or two shouldn’t depend on the stock market. Here’s a number worth a pause. In the month before Thursday, investors moved money like this:
| Fund | What it holds | Past month |
|---|---|---|
| VOO | S&P 500 | +$20.8B |
| SOXX | chip stocks | +$6.6B |
| BIL | T-bills | −$2.5B |
| SHV | short Treasuries | −$2.2B |
Cash went out, stocks and chips came in, right before a 4% day.
We can’t tell whose money that was. But if your 2027 tuition or spending money moved into stocks this fall, Thursday is a reminder to move it back, on a calm day, by plan.
What Do The Pros Do Differently?
They talk to their advisor on a calendar, not on a headline. A standing review, once or twice a year, plus a short check-in when the market moves a lot. The big decisions, mix, band, cash, taxes, get made in the calm review. The call on a day like Thursday is ten minutes: “Has anything in my plan been triggered?” Most of the time the answer is no, and that’s the point.
What this replaces: calling around for opinions after a 4% day and acting on the most confident one. The risk: a plan doesn’t stop losses. If this turns into a 2008-style stretch, you’ll still be down for a while, maybe for years, as the table shows. What the plan does is keep you from selling at the bottom or freezing when it says to buy.
What’s The Bigger Idea?
We call it plan, don’t react. Calm on a day like Thursday isn’t a personality trait. It’s a process: the call you scheduled before the drop, not the one you make during it.
Call someone who already knows your plan. After 21 earlier days like Thursday, the S&P 500 was higher three months later only 12 times, but a year later 20 times, median +27% (price only). The worst recent fall, 2008-09, took about three and a half years from the bottom to recover. A second opinion on a day like this covers four things: your real exposure (seven stocks did about a third of Thursday’s drop), your rebalancing rule, tax-loss harvesting before December 31 and your cash for 2027. Book the review now, so the next bad day is a ten-minute check-in.
What Should You Ask Next?
- Will stocks rebound today, or do you have a plan? The one-page plan to write this weekend.
Follow this story with us: we’ll keep tracking what happens after Thursday against those 21 precedents.
Is Your Next Call Already On The Calendar?
The best time to set up the call is before the next drop. If you have $1 million or more invested, get a second opinion from a Trefis expert partner advisor in a free 15-minute call before year end.
For questions about this article or underlying research, email help@trefis.com.