Frequency and Magnitude of Stock Market Corrections

August 10, 2011 | Greg Leonberger, FSA, EA, MAAA, FCA, Director of Research, Managing Partner

This week’s chart examines the frequency and magnitude of market corrections in the U.S. equity market, as measured by the S&P 500 Index. A market correction is defined as a decrease of 10% or more within one calendar year. Using data back to 1950, we found that every year featured at least one market drawdown, and over half of those years (35 of the 62 years, approximately 56%) were true market corrections. What is even more interesting is how large some of these corrections were, with 11 of those years seeing intra-year declines of over 20%. So while the steep drop over the last week has contributed to an 18% decline in the S&P 500 Index (through Monday’s close), perhaps investors can find some reassurance knowing that more severe market corrections have occurred in the past.

Greg Leonberger, FSA, EA, MAAA, FCA
Director of Research, Managing Partner

Get to Know Greg

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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