Stock Market Corrections | (2024)

The stock market does not go up in a straight line, corrections happen all the time but the eventual outcome is generally the same. The reason or catalyst changes but in most cases the fear de jour does not play out in the worst-case scenario and the market overreacts to the downside and subsequently recovers. The media adds fuel to the fire by seizing the moment, touting headlines like “markets in turmoil” or some other catastrophic phrase to make the most of ratings. This often creates fear and causes investors to make rash decisions regarding their investments because the media will have a parade of permabear guests who will tell you the world is ending. But it isn’t.

Markets are inherently volatile, but the longer you stay invested, the more likely you are to see a positive return.

• On any given day: stocks have a 53% chance of rising and a 47% chance of falling
• 3-month period: stocks rise 68% of the time and fall 32% of the time
• 12-month period: stocks rise 75% of the time and fall 25% of the time

In the history of the stock market, every pullback is a buying opportunity…eventually. There has never been a time that the market did not recover. Betting against it is a fool’s game. In fact, market pullbacks are far more common than most realize. The average percent of market pullbacks and frequency are as follows:

• 5% or greater pullbacks occur about every 7 months
• 10% or greater pullbacks occur about every 2 years
• 20% or greater pullbacks occur about every 7 years

Most declines are quickly erased but the deeper the stock market decline, the longer the recovery.

Declines in the S&P 500^® (Since 12.31.1945)

Source: Guggenheim Funds