NEW YORK (AP) — The U.S. stock market has recently fallen 10% from its previous high, driven by concerns over the economy and global trade tensions. This decline, known on Wall Street as a “correction,” is a common occurrence that has been seen throughout history. While corrections are often seen as healthy adjustments that prevent stock prices from becoming too inflated, they can be unsettling for investors, especially those new to the market during a period of relentless growth.
The S&P 500 had enjoyed significant gains in the past two years, raising concerns about overvaluation as stock prices outpaced corporate profits. While some see corrections as a necessary correction of market exuberance, the larger worry is the possibility of a “bear market,” defined as a drop of at least 20%.
The recent market turmoil has been attributed to various factors, including uncertainty surrounding President Donald Trump’s policies, particularly his trade tariffs. The rapid back-and-forth on tariffs has created volatility and raised fears of potential economic slowdown. This uncertainty has also complicated the Federal Reserve’s decision-making process, as policymakers balance the need to support economic growth with concerns about inflation.
Stocks that had previously seen explosive growth, particularly in sectors like artificial intelligence, have been hit hard during this sell-off. Companies like Nvidia, which had experienced significant gains in previous years, have seen substantial declines in 2025. Market watchers are closely monitoring the situation to gauge the potential impact on future market performance.
While corrections are a regular occurrence in the market, the current environment of uncertainty and volatility has raised concerns about the sustainability of the recent bull market. Investors are advised to stay informed and cautious as the market navigates through these turbulent times.
Various factors including interest rates, trade wars, and a European debt crisis have led to market pullbacks. The most recent correction in the U.S. market occurred in 2023, with the S&P 500 dropping by 10.3% between July and October. During this time, high Treasury yields were pressuring stock prices as investors adjusted to the Federal Reserve’s decision to maintain high rates. However, optimism soon emerged as expectations of rate cuts grew.
In 2022, the market experienced a correction that almost turned into a bear market. The Federal Reserve had started raising interest rates to combat severe inflation concerns, sparking fears of an economic slowdown that could trigger a recession. Despite these worries, the recession did not materialize, and stocks rebounded. The S&P 500 fell by 25.4% during the 2022 bear market.
Historically, corrections that recovered before turning into bear markets took an average of 133 days to bottom out, with losses averaging nearly 14%. It took an average of 113 days for the index to recover from these losses. In contrast, bear markets have lasted around 19 months on average, with the S&P 500 experiencing losses of 38.5%.
Bear markets can be severe, with investors potentially losing a significant portion of their investments. For instance, between late 1929 and mid-1932, the stock market plummeted by over 86%. Some bear markets, like the one in Japan from 1989 to 2024, have taken decades to recover.
Despite the uncertainty surrounding the current market conditions, historical data suggests that staying invested can lead to eventual recovery. While it is unclear how the market will unfold, some investors anticipate policy adjustments from the government to mitigate potential damages. The economy has shown signs of stability, but the future remains uncertain due to various unknown factors.
