Market corrections & bear markets

A new note from stock market analysts Birinyi Associates shows it is rare for a market correction to turn into a full blown bear market.

Looking at market corrections during bull markets since 1962, the research found 25 corrections of 10% or more.

Only nine of these corrections (36%) resulted in the start of a bear market.

Assuming this event follows the pattern of previous market corrections, Birinyi Associates estimates that the S&P 500 will bottom out at 1,184 points on 25th August. As I type this, it currently stands at 1,200 points.

There was potentially bad news in this research as well.

History tells us that the average market correction since 1962 has lasted for 118 days, with an average decline of 13.2%.

With better than expected US jobs data published this afternoon, we can hope that the forces of action and common-sense are starting to slow this particular market correction and that market volatility will start to reduce from here.

Photo credit: Flickr/Martin Bamford