As 2018 comes upon its final days, the stock market prognosis is looking challenged. Despite solid economic fundamentals, the stock market has been increasingly volatile. This is the point where retail investors start to make mistakes without some coaching.
A market correction is considered a drop of more than 10% and a pullback is a drop between 5% and 10%. Well if we look at the historical record of the S&P 500 since the great recession in 2008, there have been 5 corrections and 7 pullbacks. What is also interesting to note is that between the beginning of 2016 and the beginning of 2018, there were no pullbacks or corrections. Investors have simply gotten accustomed to this low volatility. However, corrections are a normal part of every market cycle. None of us has a crystal ball to see exactly how deep this current correction will be, but maintaining a disciplined strategy and re-balancing is a better approach than trying to predict the future. Yardeni Research Inc. published this chart which shows all the market corrections and pullbacks since the great recession ended in March 2009. If you’re interested in the full report going back to 1929, click here.
Cheers!
Investors cannot invest directly in indexes. The S&P 500 is an American stock market index based on the market capitalization of 500 large companies having common stock listed on the NYSE or NASDAQ. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.