September 20, 2021

We continue to hear a lot about the steadiness of the S&P 500’s rally over the last year, now exceeding 300 calendar days without a 5%+ pullback. This may seem like a long time without a drop, but the current streak is only the 13th longest on record for number of calendar days without a 5%+ decline in the S&P’s history.

We experienced a streak nearly twice as long from mid-2016 through early 2018, lasting 578 calendar days with a +43.6% gain. The longest was 593 days from December 1957 through August 1959, during which time the S&P 500 rallied +54.16%. It has been a great run, but it’s not unprecedented.

Source: Bespoke, S&P 500 Index. The S&P 500 Index is unmanaged and cannot be invested in directly.
Past performance is no guarantee of future results. 

 

With the steady drumbeat of record highs for stocks, it is easy to forget the stock market pullbacks, corrections and/or crashes occur regularly, even in good years.

A stock market “pullback” is a downward move in a stock index (S&P 500, Dow, Nasdaq) of -5% to -10%. These smaller retreats in stock prices usually to occur every 7 months. The last pullback for the S&P 500 was in October 2020 (-7.1%). A stock market “correction” is the movement downward in stock prices of -10% to -20%. On average, these occur every 2 years. Finally, a “crash” is a -20% or greater drop in stock prices. These only happen every 7 years or so. We experienced the last market “crash” just last year with a -34% drawdown that marked the start of a new bull market.

Since 1980, there have been 5 stock market “crashes,” each greater than -25%:

November of 1980: -27.1%

August 1987: -33.5%

March of 2000: -49.1%

October 2007: -56.8%

February 2020: -33.9%

In between the five significant crashes listed above, there were 12 additional drops of -10%, or greater. Since 1945, there have been a total of 10 crashes, 29 corrections, and 84 pullbacks. We may be overdue for a correction, but that’s not necessarily a bad thing.

The market has recovered from every pullback, correction and/or crash in history. Expect, but don’t fear, these downturns. Often, they are potential investment opportunities.


Maryland Capital Management, LLC. 
Last updated September 2021. This material has been prepared solely for informational purposes and is not intended to provide, nor should it be relied upon for, accounting, legal, tax, or investment advice. The information provided herein has been obtained from sources we consider reliable, but we do not guarantee its accuracy or completeness. These materials are subject to change, completion, or amendment from time to time without notice, and Maryland Capital Management, LLC. (“MCM”) is not under any obligation to keep you advised of such changes. The views expressed are those of the author as of the date referenced and are subject to change at any time based on market or other conditions. Past performance is no guarantee of future results.