The Market
Normality Report
Where today’s S&P 500 sits in 75 years of historical data, across four metrics. A reference for serious investors and the advisors who guide them.
Most investors don’t know where they actually are.
Every week the financial press tells you the market is doing something unprecedented. A correction nobody saw coming. A rally that defies the fundamentals. A crash that proves the system is broken. Usually, none of it is true. Markets do what markets do. Drawdowns happen. Recoveries happen. Stretches of calm and stretches of stress alternate the way seasons do.
The problem isn’t that markets are unpredictable. The problem is that most investors don’t have a frame of reference. Without one, every drawdown feels exceptional. Every rally feels overdue for a correction. Every CNBC chyron lands as if it’s telling you something new.
This report exists to give you that frame of reference. Across four simple metrics, we show you exactly where today’s S&P 500 sits inside 75 years of historical data. How often the market has occupied this zone before. What typically happened next. How long it usually took.
It will not tell you what the market will do next. Nothing reliably does. But it will tell you whether what’s happening right now is unusual or routine — and that distinction is the difference between confident, disciplined investing and the panic that destroys real wealth over careers.
What “normality” means, in a market that’s anything but normal day to day.
Markets are not normally distributed. The classic bell curve fails to capture how markets actually move — fat tails on both ends, persistent regimes, occasional shocks that the normal distribution rules out as impossible. Anyone who has lived through 2008, 2020, or 2022 has felt the limits of standard models.
But what markets DO have is empirical structure. Across 75 years of S&P 500 data, certain patterns repeat. Drawdowns of a given depth happen at predictable frequencies. Distances from the 200-day average cluster in observable bands. Twelve-month rolling returns sit in zones we can name and count.
We call this empirical structure “market normality.” Not normality in the textbook statistical sense, but normality in the practical sense — what is routine, what is uncommon, what is rare, what is exceptional. Each of the four metrics in this report sits inside one of five zones, defined by where it falls in the historical distribution.
Four metrics. Different lenses on the same market.
No single metric captures “where the market is.” Drawdown tells one story; valuation tells another; momentum tells a third. The Market Normality Indicator tracks four metrics that together give a full picture — when they agree, the signal is strong; when they diverge, the disagreement itself is informative.
Where the market sits, right now.
Read the snapshot as a starting point, not a verdict. A single Stretched reading on one metric does not mean the market is about to correct. Three metrics agreeing, on the other hand, is a stronger signal than any one of them in isolation. The next pages dig into what each zone has historically meant for the year that followed.
Drawdown from all-time high
How far below the recent peak the market sits. The metric you feel most when you look at your statement.
| Zone | 1-yr avg | 1-yr positive | 3-yr avg | 3-yr positive |
|---|---|---|---|---|
| Crisis | +38.5% | 100% | +68.6% | 100% |
| Severe | +15.9% | 95% | +44.4% | 100% |
| Elevated | +5.9% | 77% | +35.2% | 94% |
| Routine | +11.0% | 79% | +29.5% | 69% |
| CalmToday | +12.4% | 83% | +44.0% | 87% |
Distance from 200-day average
How far above or below the long-term trend the market is trading. The 200-day average is the most-watched trend line in the world.
| Zone | 1-yr avg | 1-yr positive | 3-yr avg | 3-yr positive |
|---|---|---|---|---|
| Crash | +24.8% | 90% | +53.1% | 98% |
| Bear | +5.7% | 58% | +35.7% | 79% |
| Below | +10.8% | 82% | +41.3% | 83% |
| Above | +12.6% | 85% | +37.0% | 85% |
| StrongToday | +15.0% | 89% | +47.9% | 92% |
| Stretched | +16.2% | 99% | +37.7% | 91% |
12-month rolling return
What the market has done over the past year, with dividends. The figure most often quoted in financial media.
| Zone | 1-yr avg | 1-yr positive | 3-yr avg | 3-yr positive |
|---|---|---|---|---|
| Crisis | +25.9% | 90% | +54.7% | 100% |
| Bear | +4.3% | 58% | +36.3% | 84% |
| Weak | +14.2% | 88% | +45.8% | 82% |
| Normal | +9.9% | 83% | +34.7% | 81% |
| StrongToday | +16.0% | 91% | +41.9% | 84% |
| Stretched | +13.0% | 84% | +45.3% | 95% |
Year-to-date return
What the market has done since January 1. A near-term mood reading that complements the 12-month metric.
| Zone | 1-yr avg | 1-yr positive | 3-yr avg | 3-yr positive |
|---|---|---|---|---|
| Bear yr | +15.8% | 82% | +50.5% | 100% |
| Down yr | +5.2% | 55% | +33.5% | 81% |
| Flat | +11.1% | 81% | +39.7% | 83% |
| Up yrToday | +12.4% | 89% | +40.3% | 80% |
| Strong | +15.1% | 90% | +38.2% | 88% |
| Banner | +15.0% | 90% | +50.5% | 98% |
Why this changes how you invest, even if it doesn’t change the market.
The single largest cost in most investors’ long-term returns is not the wrong stock pick or the missed sector rotation. It’s behavior. Specifically, the panic that takes hold when a routine drawdown feels exceptional, and the FOMO that takes over when a routine rally feels unmissable.
DALBAR’s research has put a number on this for decades: the average equity investor consistently underperforms the funds they own, by a meaningful margin, because of when they buy and when they sell. The funds didn’t fail. The investors timed themselves out of the returns.
A frame of reference is the cheapest, most reliable defense against that pattern. When you know that today’s 12% drawdown sits in the Routine zone — a zone the market has occupied a third of all trading days since 1950 — the panic loses its edge. Knowing the frequency dissolves the urgency.
None of this is a market-timing system. The Market Normality Indicator will not tell you when to buy or sell. It will tell you whether what you’re feeling is supported by the data, and that question alone is worth more than most market-timing systems combined.
How serious investors and advisors actually use this report.
The Market Normality Report is a reference, not a tactical signal. The most useful applications we see across our subscriber base fall into five patterns.
You don’t have to be a stock market guru to invest like one.
Advising Alpha helps serious investors stop guessing and start growing. We show you what’s actually working on Wall Street through time-tested model portfolios, weekly briefs that cut through the noise, and the discipline to compound through every market.
We’re a publisher, not a Registered Investment Adviser. Mutual funds and hedge funds publish audited live performance because the regulatory framework requires it. They also charge management fees, demand minimums, and lock up your capital. We do none of that. We share rigorous backtests of our methodology, our weekly editorial commentary, and the discipline behind our positions. We treat the backtests as a starting point, not a promise.
This report updates quarterly. New editions ship at the start of each quarter with refreshed data and updated zone classifications. The latest edition is always at advisingalpha.com/reports/market-normality.
How the numbers were computed.
S&P 500 price (SPX) and total return (SPXTR) daily data sourced from public market data providers, covering 1950-01-03 through 2026-04-24. The full daily data set used to compute the distribution comprises 19,206 trading days. Forward-return calculations use SPXTR (total return, with dividends reinvested) wherever available.
Each metric's distribution was computed across the full historical period. Five zones were defined per metric using empirical percentile cutoffs that produce intuitively interpretable bands (Compressed / Routine / Elevated / Stretched / Extreme). Zone boundaries are static across editions of this report so that zone classifications are comparable quarter-to-quarter.
For each metric and zone, every trading day in the historical period was tagged with that day's zone classification. Forward returns were then computed for every tagged day at the 1-year and 3-year horizons. The figures shown represent the simple average across all qualifying days, plus the percentage of those days for which the forward return was positive. Sample sizes vary by zone and metric; rare zones (Extreme) have fewer days and correspondingly wider statistical uncertainty.
Historical distributions describe what has been, not what will be. The forward-return statistics are conditional means — useful as context, not as predictions. A specific reading in a specific zone has produced a wide range of forward outcomes; the average can hide that variance. Investors should treat zone classifications as one data point among many, not as a market-timing signal.
Past performance does not guarantee future results. The distributional patterns in this report are derived from historical data only. Markets can produce regimes outside the observed historical range, and zone classifications may not capture every relevant feature of the current environment.
This report is educational and informational only. It is not investment, financial, tax, or legal advice. Advising Alpha is a publisher, not a Registered Investment Adviser. Readers should consult a qualified financial professional before making any investment decisions.