These last few weeks have been brutal for the world of stocks. During October alone, the S&P 500 stock index dropped by nearly 7%, wiping out all YTD gains. A typical diversified portfolio, holding 60% stocks and 40% bonds fell by roughly 4.75%. No matter how you look at it, ouch.

Is that really a big deal, or unusual? Well, it depends.
Quick, without looking,

How many times has the S&P 500 stock index fallen by at least 5% since the market bottom in March 2009?

Answer: 23 times.

For all of these declines, what was the shallowest drop?

Answer: -5% exactly, realized from August 15th to November 4th, 2016.

What was the most serious decline?

Answer: -21.6%, realized from May 2nd through October 4th, 2011.

What has been the average decline within the 23 corrections realized since March 2009?

Answer: -9.4%

What has been the average duration of all market corrections realized since March 2009?

Answer: 42 days.

Now here’s the kicker –

Were any of those prior 23 corrections a big deal in the longer-term scale of things?

Answer: No.

Why not?

Answer: None of them led to a longer-term, deeper and protracted bear market. They all were temporary pauses within an ongoing bull market.

Why no deeper, protracted bear market?

Answer: Because the economy has been steadily growing and expanding since March 2009. In other words, no recession.

Which brings us full circle back to our initial question – Was October’s 7% correction a big deal within the bigger picture?

Answer: A resounding probably not, as there is no evidence that a near-term recession is in on the horizon.

So, was October’s drop for stocks a big deal for us, or was it business as usual?

Well, given that we see no near-term recession, our best opinion is that October’s correction, as unpleasant as it was, was another short-term pause within a larger – as of now – still ongoing (admittedly, aging) bull market.

Final bonus question –

Do you even remember any of the previous 23 market corrections since March 2009 and did they matter to you?

I’ll let you answer that for yourself.

The time will come to make portfolio adjustments in anticipation of a larger and meaningful price adjustment, but that time is not yet here for us. Be confident that we are on full alert.