History Shows S&P 500 Corrections Return 18% in 1 Year as Fed Hike Risks Rise

2 articles · Updated · The Motley Fool · Jul 19

An S&P 500 correction has historically been a buying opportunity: after the index’s first close 10% below its high, it returned an average 18% over the next year and 40% over two years.
The Nasdaq Composite showed a similar pattern, gaining 21% over the following year and 39% over two years after entering correction territory.
That backdrop matters because oil prices jumped about 13% in the week through July 17, raising the risk that inflation pushes the Federal Reserve toward rate hikes.
In the last 40 years, the first hike in each of nine Fed tightening cycles was followed by average three-month drawdowns of 10% for the S&P 500 and 12% for the Nasdaq.
Midterm years have also brought deeper average declines—17% for the S&P 500 and 24% for the Nasdaq—supporting the case for staying invested rather than trying to time rebounds.