10%= correction, 20%= bear market.
I know these arbitrary numbers sometimes seem silly, but when looking at the data, you have to draw the line somewhere. Get over it, let’s move on.
The S&P 500 has been in a drawdown for the last eight months. Stocks are currently 9.2% below the highs made in May 2015, just a hair away from official correction territory. Everyone knows this is totally normal, but you might be surprised to know that since 1928, stocks have been in a 10% drawdown 55% of the time. The problem of course is that they never feel normal because we don’t know in real time if this is just a correction or the start of a bear market. And the deeper stocks go, the harder it is to resist fear’s temptation.
In times like this, historical facts don’t provide much comfort and even less of a roadmap…
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