The Price Of Admission
Pullbacks, corrections and bear markets are to be expected
At the first sign of a stock market pullback or correction everyone fears the worst. We all hear how a recession is coming and the stock market is poised to crash. The fear-mongers come out in full force.
It happens every time!
Tuesday saw the pullback turn into a correction as the S&P 500 dipped to 10.1% off the February 19th highs.
YTD the S&P 500 is down just over 5%.
It sure seems a lot worse than that doesn’t it? Contrary to what you see on the news or TV it isn’t. CNBC has the scary special Markets in Turmoil graphics back up again.
Did you forget that a 10% correction happens about once a year on average?
If we look back to 2024, the maximum decline was 8%. In 2023, it was 10%.
Here is another great illustration to view how declines have occurred while the S&P 500 has marched higher.
Now bear markets are a bit scarier. Those don’t tend to happen all that often. When they do, they’re not fun. We’ve only experienced 2 bear markets in the past 5 years. Only 4 in the 14 years.
We have to keep this in mind during pullbacks or corrections. They all don’t turn into bear markets, or worse yet crashes.
Sometimes you just have to sit on your hands and ride them out. In time they pass. Maybe you even do some buying. Just avoid the overreactions.
Remember that pullbacks, corrections and bear markets are the price of admission to investing in the stock market. That won’t ever change.
My Plan
So what am I doing during this correction? I’ve been asked this question a number of times in the past few days.
On Saturday in my update, Investing Update: Time To Buy Or Wait? I discussed my thought process and what my plan was. I have slightly changed my view. Here is my updated view and plan.