Key Takeaways
· Stock market corrections and volatility are a normal part of the investing cycle
· While stock market corrections can feel unpleasant, the U.S. stock market and economy recover over the long-term
· The importance of having a disciplined investment framework focused on strategic asset allocation and time in the market (not timing the market)
After setting stock market highs on February 19, 2025, the S&P 500 Index (index of mostly large-cap U.S. stocks) has fallen around 10% since then. A stock market decline of -10% or more is considered a “correction”.
The S&P 500 Index has experienced 38 market “corrections” since the 1950s. Therefore, there is a stock market correction approximately every 1.84 years. The last stock market correction for the S&P 500 was in September 2022, which is approximately 2.5 years ago. Looking at more recent data, over the 20-year period from 2002-2021, a correction occurred in 10 out of 20 years, or 50% of the time. The key takeaway here is that stock market corrections are not uncommon, however, the catalyst for each correction are often different.
The recent stock market volatility is likely influenced by several factors. First, the recent drawdown is shortly after a strong stock market rally as the S&P 500 gained +48% from 10/22/23 thru 2/19/25. Second, and likely the biggest contributor to the recent drawdown is uncertainty around tariffs. The uncertainty around the timing (when), duration (how long or short), and magnitude (marginal or material impact) of tariffs makes it hard for corporations (and investors) to plan for business investment. Third, the uncertainty around tariffs has led to risks that the U.S. economy will slow.
At Landing Point Financial Group, we lean into our disciplined investment philosophy during periods of short-term volatility, as selling during a drawdown can lock in potential losses as well as missing out on the market’s subsequent recovery. We will continue to monitor financial markets and make appropriate changes as needed, to make sure client portfolios are positioned for long-term success. At Landing Point Financial Group, we will continue to invest with a long-term and disciplined approach catered to our clients and their individual goals.
Please reach out to your advisor if you have any questions.
Compliance Disclosure: Landing Point Financial Group, LLC is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. For more information please visit adviserinfo.sec.gov and search for our firm name.