Outbreak and the MarketsSubmitted by PI Financial Corp on March 2nd, 2020
A correction is defined as a 10% decline in one of the major indices (S&P 500, TSX etc.) from a recent 52-week high to close. Historical analysis shows these corrections result in a 13% decline and take about four months to recover to prior levels on average. However, a four month recovery on average only happens if the markets do not fall into bear market territory....down 20% from a high. The most recent corrections occurred from September 2018 to December 2019 when the S&P 500 bounced in and out of correction throughout the autumn before plunging into a bear market on Christmas Eve.
How bad can it get ?
There have been 12 bear markets since World War II with an average decline of 32.5%, as measured on a close-to-close basis. The last bear market was October 2007 to March 2009, when the market dropped 57% and then took more than four years to recover. Bear markets have lasted 14.5 months on average have have taken two years to recover on average.
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