Stocks are falling again, and markets are feeling more tense by the day.
The S&P 500 just erased all of its summer gains, yields are at a 16-year high, and global currencies are plunging.
It feels like we’re taking a big step back in this bull market. And technically, we are. The S&P 500 may be on track for its first correction — a 10% drop — since the bear of 2022. Plus, we’re close to the 200-day moving average, a key line in the sand for bull markets. And a fall below that could take the S&P 500 to a key retracement level — the halfway point from the 2023 high down to the March low.
But in the grand scheme of things, the US economy looks fine.
So as you watch prices fall, keep these things in mind:
Watch oil prices, the US dollar, and yields. These are the main pressure points on US stocks. Oil prices rising alongside yields and the dollar doesn’t make a lot of sense, but as the trio rises, it increases the chances of something important breaking. That important thing could be the job market, consumer spending, or company profits. And in the short-term, keep an eye on the technicals.
Remember that this is normal. Maybe not this environment, but the drop in prices is. 10% drops have happened about once every two years since 1950. Only about a third of them turn into bear markets, and that often happens around recessions or unforeseen crises.
Check your timeframe. If you’re a long-term investor building wealth over years, this may just be a blip on the radar. On average since 1950, 10% drops in the S&P 500 have lasted five months, but they’ve taken just four months to recover.
*Data sourced through Bloomberg. Can be made available upon request.