Anyone that has invested in the stock market the past few years have experienced the ups, downs, and all the volatility in between. While the stock market has done well recently, sometimes the stock market needs a breather.

From the lows reached in October, the S&P 500 has rallied 27% with relatively low volatility.

market return since October 23

It’s unrealistic to expect the stock market to go straight up like this indefinitely.  It would not surprise me if we had a healthy correction on the horizon.

While it’s impossible to pinpoint the exact timing or severity, historical patterns can help give us an idea of what to expect.

Historically, the U.S. stock market typically experiences a 5% decline three times a year and a 10% decline every other year. Until recently, there had not been even a 2% pullback this year, which is unusual.

The corrections in the market do not necessarily indicate a more severe bear market. The chart below illustrates the corrections that have occurred since the March 2009 low. Among these corrections, only two have developed into bear markets.

S&P 500 corrections since 2009 of 5% or more

The average decline was -11.2%, lasting 64 days from start to finish. While many of these corrections may have felt like they would never end, they ultimately turned out to be healthy corrections during bull markets.

It’s important for investors to understand historical trends and temper their expectations. By doing so, they can navigate volatile periods with confidence, knowing that temporary declines are a normal part of the stock market cycle.

George Maroudas, CFP®

George Maroudas, CFP®

Twitter @ChicagoAdvisor

Disclaimers / Sources:

Data from YCharts as of 4/8/24.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.