A Wealth of Common Sense: Volatility Clusters

The stock market’s 10% correction from all-time highs is, in many ways, right on schedule. During 2024’s occasional pullbacks, stocks never hit a 10% correction. On average, markets correct once every two years.

Meanwhile, a bear market is a 20% drop from all-time highs. Those occur less often. Typically, there’s 1-2 per decade. The 2010s had no bear market. But 2020 and 2022 already saw bear markets. It’s highly unusual to have three bear markets in a decade.

With more and more capital invested in financial markets, both a downturn and a recovery seems faster than ever. That’s because money can move quickly. And more traders tend to push stocks around more over the short-term.

So, while there has been a bit of a volatility cluster in the 2020s, it’s not out of the norm. And even with the recent pullback, investors have fared incredibly well in the first half of the 2020s.

While economic trends and headlines may shift, rising productivity and better technology make lives better.

But human nature hasn’t evolved. We can still get overly greedy and push markets up too high. Or get too fearful, too quickly, and push markets lower. Some are already calling this market pullback nothing more than a “growth scare.” Time may yet prove them right.

To see the full trend of market corrections and bear markets, click here.