Please ensure Javascript is enabled for purposes of website accessibility

A Foolish Take: What to Expect From the Stock Market Correction

By Dan Caplinger - Updated Nov 26, 2018 at 3:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

How long could it last? History has some clues.

The stock market has had a rough couple of months, with the S&P 500 (^GSPC 3.06%) index closing on Nov. 23 down more than 10% from its all-time highs in late September. That qualified for what most market watchers officially call a correction, and although such downward moves have been few and far between during the bull market of the past 10 years, the current correction marks the second just in 2018.

The question on many investors' minds is how long the current stock market correction will last. Historically, corrections have tended to come quickly, with the worst losses coming within just a few months. In fact, the current correction is already longer than the downward move in early 2018, and approaching the length of the 2010 market correction, which was the first break in the huge upward move in the S&P 500 following the end of the financial crisis.

Bar chart showing length of stock market corrections.

Data source: Yardeni Research. Chart by author. *Current as of Nov. 23.

Of course, after the market hits bottom, it takes time to recover. But the S&P 500's track record on this score has been impressive as well. In 2010, stocks hit new highs before the end of the year, and even after 2011's large correction of almost 20%, the S&P was back at record levels by 2012. Similar patterns showed during 2015-16 and earlier this year.

The one warning about the current downturn to keep in mind is that if problems snowball into a full-blown bear market of 20% or more, it could take a lot longer to rebound. During the run-up to the financial crisis in late 2007, it took almost a year and half for stocks to hit bottom, and the bear market of 2000-02 took two and a half years.

Even so, the long-term takeaway to remember is that although corrections are inevitable, stocks have always managed to recover to new highs given enough time. Often, that time hasn't been as long as you would've thought -- even if it seemed like forever while you were going through the downturn itself.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,911.74 (3.06%) $116.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.