Now That the S&P 500 Has Experienced a Correction, What Will Happen Next? History Offers an Answer

Bram Berkowitz, The Motley Fool

Sat, Apr 5, 2025, 6:00 AM 4 min read

Oh, however things tin change. A fewer months ago, the benchmark S&P 500 seemed unbreakable and was inactive hitting caller all-time highs. But since peaking connected Feb. 19, the scale has pulled back, adjacent concisely closing astatine much than 10% beneath its precocious mark, putting it firmly successful correction territory.

Weak economical information and concerns implicit President Donald Trump's far-reaching tariffs person sent the scale into a correction erstwhile again. Investors and companies are scrambling for clarity arsenic to what comes next.

Will the marketplace proceed to tumble, oregon person investors seen the worst of it? Luckily, past tin connection an answer. Let's instrumentality a look.

In the midst of a steep sell-off, it tin beryllium casual to panic, but the world is that marketplace corrections are rather common. According to a caller study from Deutsche Bank, the banal marketplace has experienced 60 corrections (defined arsenic erstwhile the marketplace drops 10% from a 52-week high) since 1928. The corrections are considered to person ended erstwhile the marketplace doesn't autumn different 10% wrong the adjacent 30 trading days.

Deutsche Bank recovered that 44% of the time, these corrections happened astir a recession. Roughly 12% of the time, the corrections occurred during a recession, portion 32% of the time, a recession followed wrong the adjacent year. However, the remaining 56% of these corrections were not associated with a recession astatine all. Seventeen of the 60 corrections that Deutsche Bank looked astatine evolved into full-blown carnivore markets, wherever the S&P 500 falls astatine slightest 20% from its astir caller all-time high. But the bulk of the corrections, 42 to beryllium exact, ended with the banal marketplace down determination betwixt 10% and 20%.

Carson Group's Chief Markets Strategist Ryan Detrick looked astatine the banal market's 48 corrections since World War II. Detrick recovered that lone 12 evolved into a full-blown bear market. That beauteous overmuch aligns with what Deutsche Bank found. "Maybe we spell into a correction, but we bash not spot a carnivore marketplace coming," Detrick told Yahoo! Finance recently. "Early successful the post-election year, choppiness is mean and that's benignant of what's happening."