FOR HOME OFFICE AND ADVISOR USE ONLY.
A correction begins when a market declines by at least 10% from its high. Let's first
examine the historical context of this new correction. We'll then assess the current
economic and market situation.
Historical Context
On March 13th, the S&P 500 entered an official correction, meaning that this major US stock market index has fallen 10%
from its high. This decline has picked up speed this month and is certainly unnerving. According to Bloomberg data, this
was the 7th fastest US stock market correction since 1929. It took just 16 trading days for the S&P 500 to drop 10% from
its February 19th record high. Is this type of decline unusual? Does it signal impending economic doom? Thankfully no.
The S&P 500 has endured 31 corrections since 1965, but only 8 of them morphed into formal economic recessions
1
. That
means 74% of corrections didn't indicate looming recessions. Corrections occurred almost every two years since 1965,
however, and the last one occurred in 2023. This latest correction is right on schedule then! Consider corrections to be the
stock market's version of dental procedures: Unpleasant but not unusual! Figure 1 illustrates the average S&P 500 decline
associated with corrections that did or did not come with recessions.
-16% Average Loss -36% Average Loss
No Recession Followed Correction Recession Followed Correction
Corrections Have Been Worse When Preceding Recessions
Source: Data from Ross Mayfield at Baird Private Wealth Management. S&P 500 corrections since 1965. As of March 14th, 2025.
1 Ross Mayfield at Baird Private Wealth Management. As of March 14th, 2025: Five for Friday | Private Wealth Management
The S&P 500 Has Entered a Correction.
Should You Worry?
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