Blindsided by the Market Correction?

It took almost 4 full years to the day, but we’ve finally experienced a 10% correction in market prices.

And, the majority of that occurred in three trading days!

Were you blindsided by it all as the financial media is portraying?

I fully understand and empathize with how unsettling any market correction can be for you to experience. Especially when you’re at the stage in your life when you’re dependent on the assets in your Retirement Bucket™ to support you, i.e. you’re not working for income anymore.

After all, we haven’t witnessed a market correction in quite some time.

While watching the financial media have a field day with second by second reporting of falling prices, it can be challenging to maintain your confidence.

Because of this, I believe it’s a great idea take a look at history to put everything in proper perspective so we can all continue to make rational, goal driven decisions.

The first point to note is that we just went 1,420 days in between 10% corrections, the third longest run in half a century!

To put that incredible run in perspective, since 1980, the average intra-year correction was 14.2%.

That means that, at some point during a typical year over the last 35 years, market prices have fallen 14.2%. As of Monday night, this August correction just surpassed 10%.

Historical Market Corrections

Digging a little deeper into history using J.P. Morgan’s research, if we analyze market movements since 1928, here’s what we discover. On average:

  • Market prices have corrected at least 3% once a month, and have recovered in 2 to 6 weeks.
  • Market prices have corrected at least 5% once per quarter, and have corrected in 2 to 3 months
  • Market prices have corrected at least 10% once per year (14.2% per year since 1980), and have corrected in 8 months
  • Market prices have corrected at least 20% once per market cycle, and have corrected in 20 months

In spite of this, if we’re to use the S&P 500 Index as our barometer for market prices for a moment, during that 35 year timeframe while market prices corrected 14.2% on average each year, the price of the S&P 500 went from 106 to Monday night’s close of 1,893 (excluding dividends).


In short, although painful to witness, what we’ve seen so far is normal.

It’s not different.

We simply haven’t lived through it in so long that it’s jarring when it occurs so quickly.

What we’ve just experienced, and may very well continue to experience for a while, is not a surprise, and it should certainly not blindside you into making irrational, short term decisions.

If your current allocation is properly diversified and consistent with your long term, lifestyle sustaining goals. If it was designed to support your monthly cash flow needs, i.e. several years worth of future withdrawals held in money markets and short term instruments so you don’t have to sell equities in a down market cycle. And, if it was constructed with full knowledge and expectation that you will experience many more market corrections over the course of your life, then you are completely prepared for and have earned the right to treat this correction the same way you treated the bull run in market prices over the last few years: without panic.

It’s ugly and psychologically challenging, but it’s part of the investing experience.

While the overwhelming majority of Americans sit in front of their computers and television screens completely frozen with panic and indecision, you have earned the right to confidently continue to do everything you’ve always wanted to do without the fear they’re all experiencing.

Committed To Your Relaxing Retirement,

Jack Phelps

The Retirement Coach

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I appreciate the trust you place in me. Thank you! (The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)