The index just closed its worst quarter in years, but a look at history and recent signals suggests the turbulence may already be fading.
The first quarter of 2026 was not kind to investors. The S&P 500 dropped 4.6% over the three-month stretch and fell 5% in March alone, closing the books on what has been one of the more unsettling periods for U.S. equities in recent memory. Volatility surged, confidence wavered, and the VIX, the market’s widely watched fear gauge, climbed sharply as uncertainty piled up from multiple directions at once.
But rough quarters have a history of looking worse than they turn out to be.
What pushed the S&P 500 off course
The pullback did not come from a single shock. Instead, it built gradually as several concerns converged at the same time. Questions about the sustainability of artificial intelligence valuations began surfacing late last year, as investors who had bid up AI-linked stocks to historic highs started wondering whether the earnings growth would justify those prices.
Then came a broader reassessment of the U.S. economic outlook and the pace of interest rate cuts, which had been a key pillar supporting the bull market. And in recent weeks, the conflict in Iran added another layer of anxiety to an already cautious market.
The result was a quarter defined by sharp swings in both directions, with any piece of good news sending stocks higher and any negative development pulling them back down.
Three years of momentum still in the background
What the Q1 decline tends to obscure is how much ground the S&P 500 covered in the years leading up to it. The index advanced 78% across three consecutive calendar years through October 2025, driven by a powerful rally in technology and growth stocks. Companies tied to AI infrastructure, cloud computing, and software led the charge, with names like Nvidia, Amazon, and Palantir Technologies delivering returns that far outpaced the broader market.
Investors had also been buoyed by a lower interest rate environment, which made borrowing cheaper for businesses and gave consumers more room to spend. That combination created ideal conditions for growth stocks, and the market responded accordingly.
The recent pullback has not erased that foundation. It has, however, reminded investors that no bull market moves in a straight line.
The S&P 500’s second-quarter track record
History offers some context worth paying attention to. Over the six most recent second quarters, the S&P 500 rose in five of them.
- Q2 2020: up 20%
- Q2 2021: up 8%
- Q2 2022: down 16%
- Q2 2023: up 8%
- Q2 2024: up 4%
- Q2 2025: up 10%
The one exception came in 2022, when the Federal Reserve was aggressively raising interest rates and recession fears were running high. Outside of that period, second quarters have generally been favorable for investors.
The pattern also holds during recovery periods. After the sharp market crash in March 2020 triggered by the pandemic, the S&P 500 rebounded strongly in Q2 of that year. A similar rebound followed the market declines in April 2025, when fresh tariff announcements from President Donald Trump rattled investors before the index found its footing.
A floor and a forecast
Some analysts see a correction bottom forming as soon as May, with 6,000 serving as a potential floor for the S&P 500 if the current decline stays within typical correction territory. Citi strategist Scott Chronert has maintained a year-end target of 7,700, pointing to corporate fundamentals that have continued to hold up despite the geopolitical noise.
On Tuesday, Trump told reporters that U.S. military forces are expected to exit Iran within the next two to three weeks. That statement, however preliminary, offered investors a degree of clarity they had not had in weeks and appeared to reduce some of the uncertainty that had been dragging on sentiment.
What it means for long-term investors
Short-term turbulence, even when it spans a full quarter, has rarely been the end of the story for patient investors. The S&P 500 has recovered from every major downturn in its history, and the conditions that supported its three-year run, including AI-driven growth, resilient corporate earnings, and an accommodative rate backdrop, have not disappeared.
The first quarter stung. But the second quarter is now open, and the historical record suggests that may be exactly when things start turning around.