Why Pullbacks Like This One Are the Rule — Not the Exception
- Andrew Casteel CFP®
- 24 hours ago
- 5 min read
One month into the conflict with Iran, the question on every investor's mind is simple:
How bad can this get?
It is a fair question. Since the war began on February 28, the S&P 500 has fallen roughly 7%. The Dow has officially entered correction territory — down more than 10% from its February high. Oil has surged past $115 a barrel. Gas prices have climbed nearly $1.00 per gallon in a single month, reaching $3.99 nationally. And the 10-year Treasury yield has jumped from 3.96% to 4.35% — its highest level since July.
That is a lot of movement in a short period. It does not feel good. And we want to be honest about that.
What Is Driving the Volatility
The conflict with Iran has lasted longer than most investors initially expected. What began as a military operation in late February has evolved into a broader standoff involving energy markets, the Strait of Hormuz, and now multiple regional fronts.
Energy is the primary channel through which this conflict is reaching your portfolio and your daily life. The Strait of Hormuz — the narrow waterway through which roughly 20% of global oil and gas transit passes — has been disrupted since early March. Brent crude briefly spiked above $119 per barrel on March 19 before settling back. As of today, it trades near $115 — up more than 50% since the conflict began.
That kind of energy shock does more than raise gas prices. It increases the risk of slower economic growth and stickier inflation at the same time. A short geopolitical event can often be absorbed. A prolonged one forces businesses, consumers, and policymakers to adjust — and that adjustment is what markets are pricing in right now.
Where Diplomacy Stands
On March 26, President Trump extended his deadline for further strikes on Iran's energy infrastructure by 10 days, through April 6 at 8:00 PM Eastern. Over the weekend, regional foreign ministers from Pakistan, Turkey, Saudi Arabia, and Egypt met in Islamabad to explore mediation, and Pakistan offered to host direct talks. Futures markets opened Monday morning with a tentative recovery, suggesting some optimism — but no resolution yet.
The next major catalyst is clear: whether this 10-day window produces a meaningful diplomatic breakthrough, or simply delays the conflict further. Until there is greater clarity, we expect volatility to remain elevated.
Why This Is Normal — Even When It Does Not Feel Normal
Here is the part we want every client to internalize.
Market pullbacks are not rare. They are not anomalies. They are the price of admission for long-term growth.
This chart shows the number of pullbacks in the S&P 500 price index each year. A pullback is defined as a drop greater than or equal to 10% from a previous high. Date Range: January 2, 1980 to present. Source: Clearnomics, Standard & Poor's
The chart above tells the story clearly. Since 1980, the S&P 500 has experienced at least one pullback of 10% or more in the majority of calendar years. Yardeni Research's data going back to 1928 shows 56 corrections of 10% or more across 50 distinct calendar years — meaning the market experienced a meaningful decline in roughly 52% of all years. The average is about one correction every 13 months.
And yet the line on that chart — the one showing the S&P 500's price over time — keeps going up and to the right.
That brings us to the second chart, which may be even more important.
This chart shows the annual returns and largest intra-year decline for the S&P 500 price index. The largest intra-year decline is measured as the steepest peak-to-trough decline for the index during the calendar year. Date Range: January 4, 1988 to present Source: Clearnomics, Standard & Poor's
Look at the red dots. Those are the worst intra-year drawdowns — the maximum peak-to-trough decline in each calendar year. Now look at the bars above them. Those are the full-year total returns.
The pattern is striking. In 2020, the market dropped 34% before finishing the year up 18%. In 2009, it fell 27% before ending up 26%. Even in years with double-digit drawdowns — like 2016 (down 10%, finished up 12%) or 2023 (down 10%, finished up 26%) — patient investors were rewarded by year's end.
The lesson is not that every year ends well. Some don't. The lesson is that the worst moment of the year is almost never the final word.
What We Are Doing
This environment reinforces a principle we have built into every client portfolio: diversification across multiple sources of return rather than reliance on a narrow set of winners.
High-quality bonds, broader equity exposure, and a disciplined asset allocation framework are designed to help cushion portfolios when geopolitical risks rise and market leadership becomes less predictable. That is exactly what we are seeing today.
More importantly, periods of stress often create opportunity. When uncertainty rises, prices can temporarily disconnect from long-term fundamentals. That can create openings to rebalance portfolios, add selectively to high-quality assets, and position for the recovery that has followed every previous period of fear.
We are not making dramatic moves. We are not panicking. We are doing exactly what a long-term plan is built to do in moments like this: stay patient, stay diversified, and look for opportunity while others react emotionally.
The Bottom Line
Volatility is uncomfortable. It is supposed to be. That discomfort is exactly why disciplined investors earn a premium over time.
History does not tell us when this conflict will end or what the market will do next week. But it tells us something more valuable: that investors who stayed patient and thoughtful during past periods of fear were almost always rewarded — not by avoiding volatility, but by refusing to let it change their plan.
If this moment is raising questions about your portfolio, your withdrawal strategy, or your overall plan, we welcome that conversation. That is exactly what we are here for.
We greatly appreciate your trust.
About the author:
Chief Investment Officer
Andrew is the Chief Investment Officer for Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 11 years of experience in the financial services industry in the areas of wealth management and financial planning for retirement.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.