Stock Market Correction: What Happens After a 10% Drop?

"To start off, we can define a correction as a decline in the S&P 500 index of 10% or more from its most recent high. If the drawdown reaches 20% or more, then it's not just a correction; it's considered a bear market. Using the SPDR S&P 500 ETF Trust as a proxy, we can see that deep drawdowns have occurred on a regular basis since the early 1990s."

"If we include the correction from early 2025, there have been 27 10%-or-deeper S&P 500 corrections since November 1974. Given that 1974 was 52 years ago, we might calculate that there's been a market correction approximately once every two years. These corrections don't happen like clockwork; you shouldn't assume that there will be a 10% S&P 500 drawdown just because it has been a couple of years."

"Instead of fearing stock market corrections, you can choose to understand and even embrace them as opportunities can arise from deep drawdowns. Living in a constant state of dread isn't the best mindset for building wealth over time."

Market corrections, defined as 10% or greater declines in the S&P 500, are regular occurrences that shouldn't trigger panic despite feeling frightening when they happen. Historical data shows 27 corrections of this magnitude since 1974, averaging roughly one every two years. While these drawdowns are unpleasant, they're predictable features of market cycles rather than anomalies. Understanding this frequency helps investors maintain perspective during volatile periods. Rather than living in constant dread or attempting to time the market, investors benefit from recognizing corrections as normal rebalancing events. This mindset shift enables wealth building over time by reducing emotional decision-making during market downturns.

Read at 24/7 Wall St.