Almost all of my conversations this past week have at some point shifted toward the stock market.
Even as I was enjoying an evening walk through my neighborhood listening to one of my favorite TV-centered podcasts, The Watch, I couldn’t escape mention of the stock market. Smack dab in the middle of their discussion of Severance and The White Lotus, my guy Chris Ryan says as an aside:
“Well, today the stock market is crashing so…”
While I already addressed many of the concerns I heard throughout the week in my post last week—and that information is all still relevant today—the stock market still seems to be top of mind and a serious worry for a lot of people.
So, let’s talk about it again.
What is going on with the stock market?
Since we checked in last week, the S&P 500 has dipped another 3.5%.
The S&P 500 (an index tracking the 500 largest companies in the U.S.) is down about 5.75% this year and down around 10% from the high reached in late February.
We have officially entered “correction” territory. At least as of today, Thursday, March 13th, 2025 which is when I’m writing this.
A market correction is a decline between 10% to 20% from a recent peak. A “bear market” is usually defined as a decline of 20% to 30%. And a stock market “crash” is a 30% or more drop.
Despite what one of my favorite podcast hosts may have heard or regardless of what many social media outlets may be claiming to garner clicks, the stock market is not crashing.
But setting aside semantics, how concerning is this 10% plunge that’s happened rather suddenly over the past few weeks?
Well, history would tell us we shouldn’t be that worried at all. In fact, corrections like this one happen frequently.
Corrections of 10% or more in the S&P 500 have occurred in 63% of all years dating back to 1928. Meaning that over the last 97 years, there has been a double-digit correction at some point during the year more often than not.
The average drawdown (price drop from peak to trough) over the course of a calendar year is 13.6% so we’re not even at what typically happens most years.
On average, the U.S. stock market has experienced:
- A correction once every 2 years (10%+)
- A bear market once every 7 years (20%+)
- A crash once every 12 years (30%+)
Markets go down from time to time, and that’s okay. This is a feature of the stock market, not a bug.
Now, I fully realize that these numbers may have little impact on how people feel about market downturns. It’s never fun seeing your portfolio value drop. And dealing with market downturns has more to do with emotions than numbers. As Peter Lynch once said:
“In the stock market, the most important organ is the stomach. It’s not the brain.”
There may be some who are reading this who are thinking to themselves, “That historical data is all well and good, but this time it’s different because this time there’s Trump, tariffs, inflation, high interest rates, home prices remaining high, labor market slowing down, and so on and so on.”
Which is true. But remember that all of those market corrections in the past happened for a reason. Bad stuff was happening then too. People were pessimistic then too. Things always seem doom and gloom until they don’t, and the market makes a recovery.
Who knows how much further the market could falter or how long it will last, but for long-term investors, periods of discomfort are necessary in order to achieve high returns over time.
Sometimes stocks go down. This shouldn’t be distressing news. Market corrections are perfectly normal.
During times of turbulence such as these, I find it helpful to zoom out and look at the big picture. Here are trailing S&P 500 returns:
YTD: -5.75%
One year: +7%
3 years: +43%
5 years: +99%
10 years: +246%
Do you see that tiny blip at the far right-hand corner of the graph? That’s where we’re at right now.
Helps to put things into perspective, doesn’t it?
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.</em