History Says the Best Time to Buy Stocks May Be Coming

Prosper Junior Bakiny, The Motley Fool

Sun, Apr 6, 2025, 12:15 PM 5 min read

Equities haven't performed well so far in 2025. President Donald Trump's trade wars are creating significant uncertainty, while many fear that a recession might be coming -- something else that could send the stock market in the wrong direction. The Nasdaq Composite and S&P 500 have both recently hit correction territory -- defined as a 10% drop from their most recent highs. What will happen next? Predicting these things is hard, but a bear market is a real possibility.

And if it does happen, it will create incredible opportunities for savvy investors. Let's see what history says about buying stocks during bear markets.

A bear market is a 20% drop (or more) from an index's most recent high. So, correction territory gets us halfway there. Though it can be challenging to remain calm when equities fall by that much, the historical record shows that investing in stocks during a bear market is an excellent move. Let's take one recent example: the downturn that happened in 2020 due to pandemic-related disruptions. The Nasdaq and the S&P 500 have more than doubled since they hit rock bottom in early April 2020 -- that means they have generated a compound annual growth rate of greater than 15% in this period, well above the market's long-term historical return.

Let's now turn to the bear market that happened in 2022. Since that year closed, both indexes have been on a tear.

The story is generally the same for most bear markets. While it's impossible to time the market -- no one knows when equities will bottom out -- investing in great stocks in bad times is a great way to apply one of Warren Buffett's pieces of investing advice: Be greedy when others are fearful. In other words, there is no reason to fear downturns or market volatility. They are part of the process. Instead, when a bear market hits, it's a great time to start shopping for great stocks.

Let's consider one company to invest in if equities continue their descent throughout the year (or even if they don't).

Shares of the e-commerce giant Amazon (NASDAQ: AMZN) are already down by 13% this year, partly due to marketwide volatility. The stock remains an excellent pick for long-term investors, though. Amazon is a leader in several industries with significant growth prospects. It is the top player in the U.S. e-commerce market and the global cloud computing industry. These days, Amazon's cloud business -- Amazon Web Services (AWS) -- and its advertising unit are its biggest top-line growth drivers. Amazon's key metrics have been growing at a good clip.