A 10% drop for stocks is scary, but it's not that rare

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Worries about interest rates, inflation and now Ukraine have sent the S&P 500 tumbling more than 10% from its record. A drop of that size — in Wall Street parlance, a 'correction' — can be scary, but it's not that rare.

Higher rates can keep a lid on prices by slowing the economy, but they can cause a recession if they get too high. They also often serve to suck money out of riskier areas of the market, including stocks. When interest rates are higher and safe investments like bonds are paying more in interest, investors are less willing to pay high prices for more speculative plays.

This is the 24th time in the last 50 years that the S&P 500 has fallen at least 10%, including both bear markets and milder corrections.Not quite this fast. Looking only at corrections since World War II that didn’t end up becoming bear markets, it took an average of 76 days for the S&P 500 to lose 10% from a recent high, according to CFRA. This time, it took 50 days.

For declines that become bear markets, the damage is much worse. Going back to 1929, the average bear market has taken an average of nearly 20 months to hit bottom and caused a loss of roughly 39% for the S&P 500, according to S&P Dow Jones Indices.On paper, an investor can lose most of their money. From late 1929 into the middle of 1932, the stock market fell a little more than 86%, for example.

In Japan, the Nikkei 225 index is still trying to get back to the peak it set at the end of 1989. It remains roughly 30% below that level.

 

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