This year has exposed investors to some of the wildest volatility on record. The unprecedented uncertainty created by the coronavirus pandemic caused the benchmark S&P 500 (SNPINDEX: ^GSPC) to lose 34% of its value in only 33 calendar days. For context, it’s taken an average of 11 months for previous bear markets to reach a decline of at least 30%.
In addition to one of the most brutal stock market crashes in history, investors also witnessed a ferocious rally from the March 23 low. It took less than five months for the S&P 500 to hit a new all-time high from the bear market low, which is also a record.
With COVID-19 far from gone and the U.S. about to enter the heart of flu season, the question has been raised if this roller coaster ride could continue. History would certainly seem to suggest that additional volatility, with even another stock market crash, is possible.
But should another stock market crash or correction occur, there are three extremely important statistics you’ll want to keep in mind.
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1. Stock market corrections happen, on average, every 1.84 years
One of the most important things to realize about stock market crashes and corrections is that they’re extremely common. I know it might feel like the investing powers that be are specifically trying to smite you and your nest egg at times, but pullbacks in equity valuations are the price of admission to the greatest wealth creator on the planet.
Since 1950, the S&P 500 has undergone 38 official stock market corrections — official in the sense that the decline reached an unrounded 10% from a recent closing high. This works out to a correction of at least 10%, on average, every 1.84 years. Of these 38 corrections, nine have