As the current bull market enters its ninth year, it's time to recall that bull markets never go in a straight upward trajectory. Pullbacks of 5% or more and corrections of 10% or more are quite normal. But just how normal are they?
Pulling the daily S&P 500 pricing data from March 9, 2009 to March 8, 2017 we came up with the following statistics about the bull market over the past eight years.
Pullbacks and CorrectionsMarch 9, 2009 to March 10, 2017
|Event||Occurrences||Average per year||Total Number of days||Average days of length||Smallest/Largest|
|Pullbacks of 5-10%*||10||1.25||290||29||-5%/-8%|
|Corrections of 10% or more||6||0.75||326||54||-10%/-17%|
* Excludes pullbacks less than 5%. Percentages are rounded to nearest whole number.
Data source: Yahoo Finance
Factoring in the pullbacks that are less than 5%, this bull market spent two of the last eight years in declines! While most other bull markets haven't been as long as this one, they have also had their share of pullbacks and corrections along the way. The lesson here is that pullbacks and corrections are normal.
To put this into perspective, what would a pullback or correction look like at with the Dow index at 21,000? A 5% pullback would be a drop of 1,050 points. A correction of 10% would see a decline of 2,100 points. An actual bear market with a decline of 20% or more could see the Dow fall 4,200 points to 16,800. While we can't predict how long this current bull market will continue, we also can't predict how long and when corrections will occur. The one thing we know for certain is that that bull markets, corrections, and bear markets don't last forever.