January was a big month for the bears.
The S&P 500 declined 5.8% between New Year's Day and Feb.
3. On the heels of the best year for stocks since 1997, it seemed
market correction had arrived
Two weeks later, the pullback has already
come and gone
Stocks have rallied since Feb. 3, rising eight of the last 10
trading sessions to essentially erase all of January's losses.
For the year, the S&P is now nearly flat - which means it's
back close to the record-high level where it started 2014.
has retreated to where it spent most of 2013 after briefly
hitting a year high in early February.
What looked like an extended market correction now appears to
be just another relatively minor bump in this two-and-a-half-year
The pullback in January and early February wasn't the first of
its kind during the current rally. In fact, there have been
several similar pullbacks in the last year alone.
Consider these recent mini-corrections in the S&P 500:
May 21-June 24:
Aug. 2-Aug. 27:
Sept. 18-Oct. 8:
All three pullbacks were moves of more than 4% in a matter of
just a few weeks. Interestingly, the correction last May was
identical to the latest pullback in percentage lost and number of
days. Perhaps that's about as far as the market is able to
retreat these days.
What's more, these recent mini-pullbacks have actually been
good for the market. Within a month of each of the previous three
market corrections, stocks had not only fully recovered - they
were establishing new all-time highs. Now, that appears to be
happening again. The S&P closed Tuesday trading within seven
points of a record high.
Stocks never rise in a straight line forever. Occasionally
they need to hit the refresh button and pull back to allow
investors a chance to buy at more reasonable prices.
Still, the prices haven't been that depressed after the recent
mini-pullbacks. Most analysts consider 10%, not 5%, to be a
"substantial" market correction. The last pullback of 10% or more
occurred in October 2011.
It has now been more than 600 trading days since the
last 10% pullback
. That's quite a gap. But it's far from the longest one in
history. Since the S&P 500 index was created in 1928, there
have been six rallies that have lasted longer than the current
In fact, two periods in the last 25 years have dwarfed the
current market pullback drought. From October 1990 to October
1997, the S&P went a mind-boggling 1,767 days without a 10%
pullback or more. To put that in perspective, this current rally
would have to last until Oct. 1, 2018 without a 10% pullback to
match that record.
The second-largest gap between corrections came in just the
last decade. From March 2003 to October
2007, the S&P lasted 1,153 trading sessions without a 10%
Despite being back near all-time highs, stocks still aren't
overly expensive. The S&P trades at just over 15 times
forward earnings. With U.S. GDP growth improving and the Fed not
quite ready to completely pull the plug on
yet, stocks seem destined to continue their meteoric rise - for
Wall Street panicked when stocks plummeted in January. Many
insisted the sky was falling, and that this surely was the
beginning of a long market correction.
Instead, it seems the market was merely catching its breath
before another big push.
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