Dealmaker’s Diary: Why This Rapid Correction Could Mean Rapid Returns

Alpesh Patel|April 10, 2025

Everyone’s asking the same question…

Is this a V-shaped recovery or are we headed lower?

The one-day change in the S&P 500 has been dramatic, though not unprecedented.

We’ve seen massive gains during bear markets before.

The real question is whether this resembles the COVID pattern, where we never saw those lows again, or more like 2022’s pattern of rallies followed by new lows.

What’s caught many off guard isn’t the correction itself (a 10% fall is actually normal), but rather the speed of the decline.

This was the fifth fastest correction in history, taking just 20 days.

But here’s the good news: When the S&P 500 closes in correction territory, it returns to positive territory 86% of the time one year later, with a median gain of 18%.

I’m already eyeing the stocks most loved by hedge funds, looking for quality companies that could deliver 100% returns as they recover from these falls.

Depending on timing, that could mean annual returns of 15%-40%.

The opportunity is coming.

Let’s get ready to make some money.

Click on the thumbnail below to check out the full details of today’s Dealmaker Diary.

 

Transcript

Perfect timing, friends.

Given what’s happening with the markets, this is going to be popular.

This is, as I record, the one-day change in the S&P 500.

And you might say, never seen anything like it.

Well, actually, we’ve had massive gains during bear markets in the past.

So the real question people are asking: is it going to be a V-shaped recovery?

People may be diving in now, trying to recoup some of their losses, maybe even doubling down while they can, before going to all-time highs.

Or is it going to drop lower?

Now, let’s have a look at it.

What you are all asking yourself: is it going to be more like COVID, where we had our falls and then “poof” we never saw those lows again?

Have we got the same thing yet again?

Or is it going to be more like 2022, where the drops have these rallies but then move lower – a few false breakouts before you get the move up.

One leg down, two legs down, three legs down, and then a couple of higher ones – four, five – and then you’re pretty much off to the races.

Which one of these is it?

So if I try to look for clues here, you can see, the thing with COVID was that we had a quick reversal of policy.

We’ve had a quick reversal of policy now as well. And it was quite dramatic.

It looks very similar to that.

However, I’d really have to wait to make that determination because, even with this move, it’s a little bit early to tell.

If we go below this low, then it’s more likely to be like this.

If we go above this high, then it’s probably closer to this kind of reaction.

Okay?

So it’s still wait and see for me. Too early to tell. Way too early.

And if you think about the macroeconomics, it’s still too early to tell.

By the way, these falls – certainly the 10% fall – that’s the average.

A 20% bear market?

That’s a little bit uncommon.

But a 10% fall – we shouldn’t be surprised by it.

I think what’s caught a lot of us off guard is the speed of the decline.

It’s the fifth fastest. It only took 20 days. So, it’s very quick, very unusual for it to be so quick in the speed at which we got a 10% correction.

The good news is the S&P 500 performance after closing in correction territory. It generally tends to be – 86% of the time – in positive territory one year later after closing in correction.

Six months later, it’s still likely to be in positive territory.

Even three months later, more likely than not, it will be in positive territory.

And the median gain is 18%. Not bad.

I wanted to share this with you.

The year-to-date return figures are a little bit out of date.

These are the stocks most loved by hedge funds.

Now I suspect, given recent falls, I will be picking from this list.

I don’t know which ones yet. But I’ll pick some that will go up 100% to get back to their all-time highs and beyond because they’ve had long upward trends.

To give me a 100% return, if they manage to do it in two years from when I get in, when this bear market finishes (and it might already be finished, we’ll see), then that’ll be over a 40% annual return.

If it takes three years, that’ll be roughly a 26% annual return.

If it takes five years, it’ll be about a 15% annual return over five years.

I don’t know how long they’ll take.

I don’t know which of these will give me my 100% returns.

But I know, given recent falls and the nature of the companies, there are enough quality companies in here that I will look at.

When they stop falling, I’m going to look not just at all-time highs, but projecting that trend forward, I want to know if I can get 100% returns?

And as I said, depending on how long it takes, that’ll be my annualized return based upon that.

S&P 500 bear markets, I should say 2022, by the way – one-year total return post-trough.

If we’ve already hit the trough, then we might be about to get a big return.

We may have hit the trough, but we don’t know yet if it is.

It will probably need about another week to decide, as does the market.

NextEra Energy, let’s look at some of the utilities in our portfolio.

It’s fallen off a little bit.

This is pre-the-rally.

And right now, I’d say with all of these and the utilities: don’t worry. Hold on.

The whole game’s changed based on tariffs.

But the utilities should be the safest bet, whatever happens with tariffs, for obvious reasons. They’re domestic in nature. Far more domestic in nature.

Those are the only two utilities we’ve got in here.

We probably should have had more, but they’re okay for now.

Thank you very much.