On Monday, the stock market entered what Wall Street pros term a “correction,” a decline of 10% or more from the market’s previous peak, which occurred in May. No one likes to see their portfolio knocked down a peg, but it’s not the end of the world.
Here are some stats to put recent event into context, and perhaps help you relax a little.
It’s been a surprisingly long time since stocks fell by this much.
The last time the market dropped at least 10% was in October 2011. That’s one of the longest stretches of uninterrupted growth since World War II. So you might say we were due; typically, there’s a market correction every 18 months.
Most 10% drops don’t lead to bear markets.
Most of the 30-odd corrections the market has endured since 1946 didn’t deteriorate into a bear market, defined as a decline of 20% or more from the previous peak.
Just holding on usually solves the problem.
Usually, but not always, investors who waited out a correction found themselves quickly back in the black.