Bessent's market math
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Treasury Secretary Scott Bessent broke with orthodoxy Sunday when he said corrections in stocks were "healthy" and an antidote to "euphoric" market action.
The big picture: Over the long run, he's not necessarily wrong.
What they're saying: "I've been in the investment business for 35 years, and I can tell you that corrections are healthy. They're normal. What's not healthy is straight up, that you get these euphoric markets. That's how you get a financial crisis," Bessent told NBC's "Meet the Press" Sunday.
Zoom in: Corrections, or a 10% decline in the market from its recent peak, are pretty common.
- They've happened dozens of times in the S&P 500 in recent decades, most recently starting last Thursday.
Between the lines: Since World War II, such corrections have only deteriorated into bear markets (a 20% decline) about a quarter of the time, Carson Investment Research's Ryan Detrick noted on X.
- In other words, more often than not, the market bounces back.
By the numbers: In a correction, on average the market takes five months to fall from peak to bottom, and then four months to bounce back, per Clearnomics data shared by Covenant Wealth Advisors.
- After that, markets tend to rise strongly.
- On average, between 1997 and 2020, stocks were up 32% one year after a correction, per data from Gateway Financial Advisors.
The bottom line: Past performance is no guarantee of future results — but it may be a reason to worry a little less.
