Steeper Decline

“A fast 5% decline — in nine days or less — ends up being over quickly since investors acknowledge with a nervous chuckle that they overreacted. A drawn-out pullback of 5% — one that takes 40 days or more — also doesn’t usually lead to a drop of 10% or more. It gives investors time to evaluate the concerns and thereby dissipate the overall impact. This time the benchmark index needed 23 calendar days to drop 5%, and that could mean a greater chance of a steeper decline. Since 1946, there have been 20 times that the S&P 500 dropped below the 5% threshold in 20-29 days. Of these, half of them eventually declined by 10% or more, and 35% of the total didn’t stop falling until they became brand-new bear markets.” (Sam Stovall, chief equity strategist S&P Capital IQ)

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