Research — Feb 11, 2026
Returns vs. Resilience: A Five-Year View of U.S. Equity Drawdowns
Returns are often the first thing we look at when we talk about markets. They’re familiar and easy to compare. But they rarely show how those returns were earned or what it felt like to stay invested along the way. Over the last five years, U.S. equities delivered several strong calendar-year gains. On the surface, it looks like a rewarding period. Beneath that, the experience varied far more than headline returns suggest. Using the S&P 500, this analysis looks beyond performance and focuses on drawdowns instead – how deep losses became and how long it took for markets to recover. Together, these measures offer a clearer view of resilience.
Five Years, One Lens (2021-2025)
[Source – Analysis and visuals are generated using Portfolio Analytics on S&P Capital IQ Pro, based on index-level portfolio data for the periods shown. Drawdown and recovery metrics are calculated using standard portfolio analytics methodologies.]
Across the last five full years, investor experiences differed meaningfully. Some years delivered strong returns with limited setbacks. Others tested patience or risk tolerance – sometimes without derailing annual performance. The table and chart above pair annual returns with maximum drawdowns and recovery times. At first glance, 2025 looks like a solid year. Returns were positive and followed two very strong years. Once drawdowns are considered, it looks different.
When Returns and Experience Don’t Line Up
From 2021 through 2024, market behaviour mostly followed a familiar pattern:
- Strong return years generally came with shallow drawdowns.
- When returns were poor, as in 2022, drawdowns were deep and recoveries long.
In simple terms, reward and discomfort were aligned. 2025 breaks that alignment. Despite finishing the year positive, drawdowns were materially deeper than in other recent up years, and recoveries took longer. The destination was fine – the journey was not.
Different Years, Different Kinds of Stress
Not all difficult years feel the same.
- 2023 tested patience. Losses were moderate but lingered, with markets moving in fits and starts.
- 2025 tested risk tolerance. Losses were sharper and more concentrated, even though recovery was faster than in 2023.
Both years were uncomfortable. What sets 2025 apart is not how long losses lasted, but how deep they became relative to the return delivered.
The Cost of Earning Returns
Another way to view this period is return efficiency – how much drawdown investors endured for each unit of return earned. In years like 2021 and 2024, returns were far larger than the worst drawdowns along the way. In 2025, returns and drawdowns were much closer in size, a profile more common in transition or stress periods. This doesn’t make 2025 a bad year. It does suggest the cost of staying invested was higher.
Why Duration Matters
Maximum drawdown shows how bad losses became. Drawdown duration shows how long it took to recover. Long recoveries can quietly erode confidence, even when annual returns are positive. In 2025, recoveries took longer than in most recent up years, reinforcing that endurance mattered more than usual.
Closing Thought
Looking across the last five full years highlights a simple point: Not all positive years feel the same. Between 2021 and 2024, strong returns generally came with manageable setbacks. In 2025, investors were still rewarded – but only after sitting through drawdowns more typical of tougher market environments. That distinction matters, because how returns are earned often shapes behaviour more than the returns themselves.