Pull back and correction

 

Bull Markets, Pullbacks And Corrections By: Kevin Matras January 19, 2022

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After a stellar run-up last year, it looks like we are starting this year off with 

a bit of a pullback.

And I, for one, couldn't be happier. 

Why? Because the 'fear' of a pullback was keeping plenty of investors on the sidelines.

And the sooner we can get this over with, the sooner we can get back to the bull market rally.

What's important to know is that pullbacks and corrections are common.

Every bull market has them.

In fact, stocks usually pull back about -5% roughly 3-4 times per year. 

(A pullback is defined as a decline between -5% and -9.99%.)

And we saw roughly 3 pullbacks last year for the Dow and the S&P, all while the markets went up 18.7% and 26.9% respectively.

Stocks usually correct -10% on average about once a year. (A decline of -10% to -19. Up 99% is called a correction.)

And we saw that with the Nasdaq last year too while finishing up 21.4%.

But these are the pauses that refresh before the next leg up.

Now the markets are at it again.

From the recent highs, the Dow at its worst has pulled back by -5.24%, the S&P by -5.99%, and the Nasdaq by -11.6%.

After shaking the tree, it will be exciting to see how high the market can go this time.

While pullbacks and corrections are never fun when they're happening, if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.