The Current Stock Market Correction Is Behaving Like The Last One


View from the Observation Deck  

  1. A stock market correction occurs when a benchmark index, such as the S&P 500, sustains a price decline of 10% or more from the most recent peak. A bear market would entail a price decline of at least 20%.  
  2. Since World War II, the S&P 500 Index has experienced a correction, on average, about every 18 months, while the median time between corrections is just one year, according to S&P Capital IQ. So they happen fairly frequently. 
  3. The average time it takes the S&P 500 Index to fully recover its losses from a correction is four months, according to S&P Capital IQ. 
  4. As indicated in charts, both the current and previous corrections in the S&P 500 Index have involved initial 10% or more sell-offs followed by notable recovery attempts and then additional sell-offs.
  5. In the previous correction, it took five months to fully recover the losses sustained in the correction, just a month longer than the four month historical average. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently has 505) used to measure large-cap U.S. stock market performance.

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Posted on Tuesday, April 3, 2018 @ 2:20 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.