S&P 500 CURRENT CORRECTION VS MILDEST AND WORST CORRECTIONS (June 30, 1926 – May 17, 2018)
Current, mildest and worst corrections all plotted to begin on Jan 26, 2018 and scaled to start at the same index price level. Source: S&P Dow Jones Indices LLC.
Corrections are defined as a drawdown greater than 10% and less than 20% from an all-time high. This correction would currently rank as the second mildest on record should the market recover to new highs from here. On average, corrections have a 13.3% drawdown and last almost 8 months from peak-to-peak. The mildest correction charted above lasted from September 1967 to April 1968, while the worst correction began in July 1990 and ended in February 1991. Should the current event follow a similar timeline, we would expect the market to begin to set new highs towards the end of August this year.
Of course, there are no guarantees that the market won’t decline from here and break below the 20% drawdown mark, resulting in a Bear Market, but it is our opinion the underlying strength of the economy and corporate earnings make that outcome remote in the near-term. It is much more likely that the market will remain choppy and take some time to recover, which is a more normal pattern than the unusual calm of 2017.
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