Orange Monday and Historical Market Bottoms

The market was rattled yesterday. April 7th is now being coined "Orange Monday." (which is a slight dig at Trump). Yesterday felt like chaos, and for good reason. President Donald Trump announced sweeping new 10% tariffs on nearly all major trading partners last week, escalating tensions and triggering a global market sell-off.

Add in China's swift retaliation, imposing a 34% tariff on U.S. exports, and you’ve got investors panicking. The S&P 500 registered a 6% intraday decline and is now hovering 17% down from its recent peak, while the Nasdaq sank deep enough to confirm bear market territory with a 20% drop.

Markets are grappling with the fallout of these policies, and the comparisons to the 1973 oil shock seem fair. By the time the dust settles, the sell-off may feel like a tipping point for an economy already hinting at recession, with JPMorgan bumping their U.S. recession likelihood estimate up to 60%. That raises questions no one can ignore: Can this downward spiral be the bottom? What does history say about crashes like this, and how does Orange Monday stack up?

When you’re watching the numbers in red, it helps to bring up a little history. Market crashes aren’t new, and the S&P 500 has been through plenty worse. For starters, 1929 was the worst of the worst. The index nosedived an unimaginable 86%, and recovery took a jaw-dropping 25 years. That’s the kind of long road back you hope never repeats. Then there was the Dot-Com Bubble in the early 2000s, a dreamy tech-fueled market boom turned nightmare. The S&P shattered, losing almost 49% of its value from 2000 to 2002. It took nearly seven years to climb back. And of course, everyone remembers 2008, when subprime loans and risk-taking banks drove the S&P 500 into a 57% collapse, followed by a slow-but-steady 6-year recovery.

Looking back, patterns always emerge. Sure, each crash had unique triggers (bad monetary policy in 1929, speculative valuations in 2000, and risky Wall Street behavior in 2008). But there’s a rhythm, even to chaos. Bear markets, on average, last about 13 months from peak to trough. That’s not forever, but panic makes it feel eternal. Looking further ahead, the typical time to recover (reach back to the pre-crash peak) is around 27 months post-bottom.

Even from panic-induced lows, recoveries tend to follow repeatable signals. One is the VIX, known as the market's "fear gauge." If you ever wanted to measure investor anxiety, look at the VIX. It spiked to 80 during 2008 and soared past 60 in 2020's crash, marking capitulation (peak fear, where we’re closer to recovery than deepening losses). The VIX today is elevated at around 50, but this doesn’t feel extreme just yet, suggesting we might not have hit rock-bottom. Oversold conditions, too, are classic precedents of market rebounds.

The RSI, tracking oversold markets, is now under 30 for the S&P 500, sparking hints of readiness for a reversal. Yet oversold stats alone don’t guarantee a recovery, there's still room for deeper lows if fear persists.

Corporate valuations paint a similar picture of uncertainty. Right now, P/E ratios in the mid-teens signal a correction, but they haven’t plummeted to absolute bargain-basement levels we’ve seen in major crashes. When the 2008 market bottomed, P/E ratios fell below 10, screaming undervalued. Is Orange Monday the bottom? It’s impossible to confirm. History tells us crashes can draw out longer than expected, but they also favor those with patience over panic-selling.

Timing the exact bottom is incredibly rare. The average recession-driven bear market sees equity prices drop 36% peak-to-trough, meaning the S&P 500 still has room to fall another 10-20%, assuming a historical trend plays out. While Orange Monday brought plenty of pain, the sell-off feels incomplete without more panic-based capitulation, think sharp volume spikes or blowout earnings collapses.

It’s worth stepping back and asking: what do investors do now? Long-term success is often about avoiding bad decisions during crises, starting with not rushing to panic-sell into chaos like Orange Monday. History rewards consistent, steadied approaches that embrace fundamentals and diversification. Diversification works over time because you’re not relying on a single sector or asset to do all the heavy lifting. For example, consumer staples or healthcare stocks tend to weather downturns better than tech or industrials.

The market also favors those with patient eyes for recovery. Historically, recoveries show breadcrumbs investors can follow without guessing wildly. Stabilized corporate earnings (good quarterly reports) often hint at initial progress. Demand rebounds, driven by rising consumer confidence, ignite actual economic recovery. Investors who track volume trends closely are even better equipped, as increased trading activity from institutions often signals markets turning upwards.

Is this the great market bottom of 2025? Probabilities say maybe not yet. More short-term pain could unfold, especially with ongoing tariff-related tensions and recession fears keeping the market gripped in uncertainty. But long-term? The S&P 500's resilience has been proven trial after trial. Each historic collapse (from 1929 to Dot-Com to 2008) has rebounded spectacularly, even if patience was required.

For now, the best strategy is staying informed, diversified, and calm in the face of turbulence. It may not feel like it today, but even after the worst Orange Monday has to offer, history reminds us recovery is always part of the market’s script. Lessons from past crashes show one clear rule: don’t let short-term noise overshadow long-term opportunity. Stay steady, stay smart, and know that the worst downturns always give way to brighter recoveries.