Should You Really Buy Stocks During Market Turmoil? History Offers an Answer That May Surprise You.

The stock market's movements have kept some investors glued to their computer screens in recent days as indexes have swung from losses to gains. The Nasdaq Composite (NASDAQINDEX: ^IXIC) even crashed and entered a bear market, then began to rebound.

What was the reason for these rapid shifts in direction? Uncertainty regarding President Donald Trump's tariff policy.

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Earlier this month, the president imposed a sweeping set of tariffs that apply to countries worldwide. Tariff levels varied depending on the country, but manufacturing centers, such as Taiwan and Vietnam, faced tariffs of 32% and 46%, respectively, for example.

The news crushed the stock market as investors worried about the impact of these tariffs on corporate earnings and the economy. However, on April 9, Trump announced news that offered investors hope -- a 90-day pause on the announced tariff levels for most countries -- and as a result, the indexes soared.

This clearly is a positive step, but considering the tariff issue isn't completely resolved, major benchmarks still could offer some jolts. Should you buy stocks during such market turmoil? History offers an answer that may surprise you.

Trump reduces tariffs

First, here's a bit more detail about what's happening right now, as of April 10. Trump has applied only a 10% baseline tariff for most countries during this 90-day period that will offer the U.S. and trading partners time to negotiate a long-term solution. The situation with China still remains precarious, as China announced retaliatory tariffs, and Trump increased his tariffs on the country to 145%. But there's reason to be somewhat optimistic: Trump said he thinks the two countries will talk and make a "very good deal."

Investors were shaken by the tariff news earlier this month as the levels meant considerable pressure on earnings for U.S. companies across industries as they import raw materials and other goods. For example, tech giants Nvidia and Apple produce products abroad, while a retailer like Target imports various types of merchandise sold in its stores from other countries.

However, if countries are able to negotiate, this pressure may be lifted -- both for companies and their customers. That's a positive for everyone and for the overall economy.

It's too early to predict exactly what will happen in 90 days, but it's still important to consider the question about buying stocks in times of turmoil. To do this, investors should look at the performance of the S&P 500 (SNPINDEX: ^GSPC) following past market crashes.

Some crashes happen abruptly, with most losses occurring in a short period of time. That's been the case in recent weeks and was the case during the coronavirus market crash back in 2020. Other crashes, such as the 2008 financial crisis and bursting of the dot-com bubble in 2001, were preceded by months of gradual declines.

History shows a common element

In either scenario, history shows us one common element: Following the biggest drop, the index gradually went on to climb, and the gains were lasting. The chart below shows the period during and after the 2008 financial crisis:

^SPX data by YCharts.

The following chart shows the period during and after the coronavirus market crash:

^SPX data by YCharts.

Complete recovery and gains haven't happened overnight, but following each crash, the index has progressively made its way higher and delivered a win to investors over the long run. The same is true of quality stocks that suffered during those times.

For example, Microsoft's declines of about 20% in the dot-com aftermath are hardly visible when looking at the stock's long-term performance. It's climbed more than 1,200% since then. The same is true for credit card giant American Express, which suffered during the 2008 financial crisis and the coronavirus crash but went on to soar after each tough time.

^SPX data by YCharts.

Should you buy stocks now?

The surprising answer to this question is, yes, you should buy stocks during market turmoil. It's during these moments that you can scoop up quality players at reasonable valuations. Any declines that may come in the near term generally won't impact your overall returns by very much if you hold on for a number of years.

Of course, it's very important to focus on the word "quality." If you buy companies today with weak competitive positions or poor financial situations, you may lose no matter how long you hold on to the shares. But if you choose companies with track records of success, strong earnings, and bright future prospects, history shows you could invest now, during uncertain times, and potentially score a major win over the long haul.

American Express is an advertising partner of Motley Fool Money. Adria Cimino has positions in American Express and Target. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Target. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.