Daily Spotlight: Stocks Can Survive a Pullback

Summary

Investors already have endured a pullback in the stock market this year. These things happen. But they don’t necessarily signal that a bull market is on its last legs or that a bear market is imminent. A pullback occurs when stock prices drop 5% from their highs. That happened two weeks ago, when, in response to the war in Iran and the spike in oil prices, the S&P 500 fell 5% below its all-time high of 7,002, ultimately closing slightly below the 6,500 level. Historically, pullbacks occur on average three times per year, or 15 times per traditional 5-year market cycle. Corrections — when stocks drop 10% — are less frequent; they happen about once per year, with the most recent occurring during the build-up to President Trump’s ultimately watered-down tariff plan in the spring of 2025. Stocks have always recovered from pullbacks and corrections, as well as from bear markets. The average time to rebuild after a pullback has been one month. For a correction, it may take four months. Those recoveries are more dependent on the fundamentals in the market at the time. As we review the current market fundamentals, the economy is growing, interest rates had been falling before the oil scare, and corporat

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