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How Long Do Market Corrections Last?

David Hicks

Stock market volatility has reared its head again and recently, the S&P 500 Index fell into correction territory, meaning it fell at least 10% from its most recent high.  

Several factors triggered the decline: the end of government stimulus, impending interest-rate hikes by the Federal Reserve, runaway inflation, and the threat of military action between Russia and Ukraine.   

The correction came about a month short of the two-year anniversary of the S&P 500’s previous correction, which happened on February 27, 2020, near the beginning of the COVID-19 pandemic.  

No one enjoys corrections but, if it’s any consolation, the U.S. stock market experiences about one correction per year. They are common (if uncomfortable) events.  

While watching the value of your portfolio fall can be alarming, remember these important points about corrections:  

  • corrections happen regularly
  • most corrections aren’t tied to a more severe crisis
  • corrections are necessary for the health of the stock market 

In the chart below, we can see that the average recovery period for S&P 500 corrections of less than 30% is five and a half months – not significant for a long-term investment strategy.  

Corrections in the S&P 500 Index 

Peak to Trough Decline    Months to Recovery 
10%-20%  4.4 
20%-30%  5.5 
>30%  37.2 
all  11.6 

Source: National Bureau of Economic Research, Bloomberg. Data are from 1/1/1966-1/24/2022. 

Given the strength of the U.S. stock market since the end of the March 2020 slide, the recent volatility it has experienced isn’t surprising. For now, higher volatility is not expected to translate to a bear market or a recession in the near future. Bumps are a normal part of the investment cycle. 

And, retirees are certainly more susceptible to be fearful of market turbulence, as they may not have the stomach — or the time — to participate in too much volatility.  The 4-Box Strategy was created to help Boomers stay the course and be less fearful with their investments.

If this most recent correction caused you discomfort, you may benefit from talking to an advisor about your long-term financial goals—and making sure your current portfolio supports them. If you’re ready to schedule that conversation—at no cost and with no obligation—click here. 

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