A one-day market crush of this magnitude is unnerving for sure, especially on the back of the aggressive tech selling seen in July, but traders are trying to keep some perspective. The S & P 500 is down 5.7% from its all-time high following Friday’s losses, making this the second decline of greater than 5% this year. Bank of America found that since 1929, there are typically three such declines a year. So, this is still typical market action. Bank of America also found that over the past century, the stock market has experienced on average one 10% correction a year. So, if the S & P 500 follows the Nasdaq Composite into correction territory, that too would be just normal market activity for any given year. The S & P 500 is still up more than 12% for 2024. .SPX YTD mountain S & P 500, YTD History shows that this market behavior does not change much in election years. S & P 500 drawdowns in election years averaged 7.5%, according to Piper Sandler. The firm found that the market typically rebounded after those drawdowns as the uncertainty of the election was resolved and the year came to a close. However, we are already above the typical annual return found in election years according to Piper Sandler, at a little over 7%. “It’s always funny to me because the market gets very overbought, and we correct and people think it’s the end of the world, but in reality, it’s exactly what you expect,” said Adam Turnquist, chief technical strategist at LPL. “Corrections are completely normal within a bull market. So when you just step away from some of the headlines, and there’s always fear, and just look at history, we’re still most importantly, in a bull market.” This has been a unique cycle in that the stock market rallied during Federal Reserve rate hikes. In the past, easing cycles have seen the biggest stock market returns, not tightening cycles. So, it is possible this market could make new history and keep falling. But most investors Friday were not quite worried of that happening yet. — CNBC’s Pia Singh contributed to this report.
