2<\/sup><\/a><\/u><\/strong><\/p>\n\n\n\nLast year, the biggest pullback we saw on the S&P 500 was just -5.2%. Thinking in a historical context, if 2022 delivered one or two 10+% corrections throughout the year, investors should see that outcome as pretty normal \u2013 even though the factors driving sentiment lower feel \u2018different\u2019 and significant (inflation, Fed rate hikes, ongoing pandemic, and war in Ukraine).<\/p>\n\n\n\n
Every market correction and volatile patch has a story tied to it, and it can be challenging for investors to accept that the market can do well even when there is war and soaring energy prices, for example. But stocks respond to earnings and shift earnings expectations over time, and right now we still see another year where S&P 500 companies are poised to deliver profit expansion. In the past month, profit estimates for S&P 500 companies went up, not down, even as the war escalated and crude oil prices soared.<\/p>\n\n\n\n
The earnings outlook is one of the main reasons I think investors should remain patient even if the stock market re-enters correction territory from here. But there is also some pretty clear history around how the stock market performs once a correction has run its course. Since 1974, the S&P 500 has gone up an average of 8+% in the month following a correction\u2019s bottom, and has risen an average of +24% one year later. A person can only participate in these rallies if they are fully invested at the bottom which almost by definition means participating in the downside volatility leading up to it.<\/p>\n\n\n\n
2018 offers a useful example from recent history to demonstrate how corrections can persist and be a little sticky in a given year. Investors may remember 2018 was a year characterized by Fed rate hikes and the U.S. \u2013 China trade war. That year, the S&P 500 endured a Q1 correction of over -10%, then rebounded nicely into Q4 only to fall back into a correction by year-end. The S&P 500 finished the year down -4.4%.<\/p>\n\n\n\n
In Q1 2019, however, stocks rebounded by more than +13%, and continued on a course throughout that year to finish up +31.5%. Strong returns often follow periods of downside volatility.<\/p>\n\n\n\nSource: Federal Reserve Bank of St. Louis3<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\nBottom Line for Investors<\/strong><\/p>\n\n\n\nNo one truly knows whether the market volatility and\/or the stock market correction has run its course \u2013 or whether there could be more turbulence ahead. I realize this is probably not a satisfying takeaway for many investors, especially given all of the uncertainty surrounding the ongoing war in Ukraine and rising energy prices. But I think investors can \u2013 and should \u2013 take solace in remembering that market volatility and corrections are not only common, but they\u2019re also healthy. Markets need to reset valuations and investors’ expectations from time to time.<\/p>\n\n\n\n
The war continues to be disheartening and disconcerting, but for now, it appears the conflict will remain regional \u2013 not global. The impact on the oil markets also appears to be better understood by markets and corporations, which may help explain some of the rallies we\u2019ve seen in stocks since March. We will continue to monitor the situation closely and will offer updates if our views change. <\/p>\n\n\n\n
In the meantime, I recommend that you keep a close eye on risks and other economic indicators to protect your investments. To help, I am offering all readers an exclusive look at our just-released March 2022 Stock Market Outlook Report<\/u><\/strong>https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&medium=blog&term=motm_blog_2022_04_04&content=stock_market_outlook_report<\/a>.<\/u><\/strong><\/p>\n\n\n\n You\u2019ll discover Zacks\u2019 view on:<\/p>\n\n\n\n
U.S. Macro Outlook – San Fransico Fed \u201cFed Views\u201d<\/em><\/li>What\u2019s alive for 2022 pessimists?<\/em><\/li>Is it time to buy U.S stocks?<\/em><\/li>Zacks market forecasts for 2022<\/em><\/li>What fundamentals are U.S. stock markets pricing in for 2022?<\/em><\/li>And much more<\/em><\/li><\/ul>\n\n\n\nIf you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free guide.<\/p>\n","protected":false},"excerpt":{"rendered":"
It’s difficult to predict when this correction will end, but it’s important to remember that corrections are common\u2014and even healthy for the market.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-11605","post","type-post","status-publish","format-standard","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/11605","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=11605"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/11605\/revisions"}],"predecessor-version":[{"id":11609,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/11605\/revisions\/11609"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=11605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=11605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=11605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/04\/photo1-1024x395.png\")