Can Investors Breathe Easy Now That the S&P 500 Correction Seems to Have Ended? Here's What History Shows.

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Keith Speights, The Motley Fool

Tue, Mar 25, 2025, 1:48 AM 4 min read

Short and not-so-sweet. That mightiness beryllium an apt statement of the latest S&P 500 (SNPINDEX: ^GSPC) correction. The wide followed scale precocious fell much than 10% beneath its highest and officially entered correction territory. However, the S&P 500 bounced backmost somewhat wrong lone a fewer days and is present little than 10% beneath its erstwhile high.

Can investors respire casual present that the S&P 500 correction seems to person ended? Here's what past shows.

Eight S&P 500 corrections person occurred implicit the past 10 years, including the astir caller one. Some were short-lived but followed by a dismal show implicit the adjacent respective months.

For example, the S&P 500 dropped by much than 10% successful August 2015. Although the scale didn't stay successful correction territory for precise long, it remained beneath the erstwhile highest for the remainder of the year. In aboriginal 2016, the S&P 500 again fell much than 10% beneath the erstwhile high. It didn't regain the losses until the second portion of 2016.

In 1 case, an S&P 500 correction became a full-blown carnivore marketplace that rapidly ended. You'll astir apt retrieve this one: It was during the COVID-19 pandemic of 2020. A carnivore market, by the way, is erstwhile a banal oregon scale falls by 20% from the erstwhile high.

However, the atrocious times didn't ever extremity truthful quickly. In aboriginal 2022, the S&P 500 entered into a correction that yet became a carnivore market. The scale didn't regain its erstwhile precocious until aboriginal 2024.

How galore times implicit the past 10 years did an S&P 500 correction not go a carnivore marketplace and alternatively acceptable the signifier for beardown near-term gains? Zero.

What does past amusement if we spell backmost much than 10 years into the past? The S&P 500 has entered into correction 56 times since 1929, based connected a Reuters investigation of Yardeni Research's data. Technically, the S&P 500 didn't beryllium successful its existent signifier with 500 companies until 1957. However, predecessors of the S&P scale person been astir for overmuch longer. Yardeni's older information included those erstwhile versions of the index.

There's bully quality and atrocious quality for investors with these past S&P 500 corrections. First, the atrocious news: Corrections often linger for a while. Reuters recovered that the mean correction lasts 115 days. That doesn't bode good for anyone hoping to chalk up near-term gains.

The bully news, though, is that S&P 500 corrections typically don't pb to carnivore markets. Reuters determined that lone 22 of the 56 erstwhile corrections (roughly 39%) became carnivore markets. The mean peak-to-trough diminution of the corrections that didn't pb to carnivore markets was 13.8%. That's a achy drop, but not too painful.