The S&P 500 recently entered correction territory due to tariff fears and economic growth concerns. However, historical data indicates that the market has consistently rebounded after corrections since 1955. On average, stocks take four months to recover following a correction. Despite the recent downturn fueled by trade war worries and weakening economic indicators, history suggests that patient investors may anticipate future gains in the market.
According to data from Covenant Wealth Advisors as reported by Axios, stock market corrections typically take around four months to recover from, with the S&P 500 showing significant gains in the year following a correction. Over the past 12 corrections since 1955, the S&P 500 saw an average return of 14.7% in the subsequent 12 months. Notably, five of these corrections hit a bottom within a day.
Looking at specific instances of corrections in history, the market performed as follows over the subsequent 12 months: +14.8% in 1955, +13.7% in 1968, +3.7% in 1990, +21.5% in 1997, and +5% in 2018. Despite concerns about the recent decline, the S&P 500 rose by 2.6% in the two days following a 10% drop from its all-time high in February.
While uncertainties persist, including inflation fears and recession speculation, market analysts suggest that bullish investors may still see opportunities ahead. Although full bear market declines typically require a longer recovery period, recent outlooks indicate a positive trajectory for the market. With major banks forecasting an average S&P 500 target of around 6,500, signs point to a potential upward trend. Some banks, including Citi and Morgan Stanley, believe that the market may have already hit a bottom, providing a glimmer of optimism for investors.
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