Aniket PujariThe market pullback to Thursday’s close brings the loss to just over 10% from the record close of 6144.15 on Feb. 19, has been quick. It was only 16 trading days ago that the S&P 500 was at a record high, according to Dow Jones Market Data. The Nasdaq Composite is already in a correction and the Dow isn’t far from one.
That should make this a good buying opportunity, said Rob Arnott, founder and chairman of Research Affiliates. Arnott told Barron’s that small-caps and value stocks have been beaten up too much and now look attractive. “This has been a take no prisoners correction,” he said. “The cheapest parts of the market have been hit just as hard as the expensive stocks.” he said.
Still, there are significant worries that stocks could keep sliding. President Donald Trump’s tariffs may ignite a global trade war, especially because it doesn’t appear that he will blink, pulling back on some of his plans, just because Wall Street is unhappy.
“The Trump administration appears comfortable with short-term pain in equity markets in order to achieve their long-term initiatives,” said Dave Mazza, CEO of Roundhill Investments, and Thomas DiFazio, Roundhill’s ETF strategist, in a recent blog post.
“Consequently, uncertainty around the extent of tariffs and short-term trajectory of economic growth are both elevated, particularly since economic growth was already showing some signs of slowing.”
Relative certainty about policy in Washington, D.C., makes companies more likely to invest and hire, keeping alive the consumer spending that accounts for the bulk of U.S. economic growth.
Whether weaker growth, and how it could affect corporate profits, will send stocks into bear market territory, for a 20% drop from their high, isn’t clear. For that to happen, the S&P 500 would have to close below 4,915.32 according to Dow Jones Market Data.
Talley Léger, chief market strategist with The Wealth Consulting Group, said he isn’t worried about a bear market. He noted that inflation pressures are finally starting to recede and earnings growth for this year is still expected to be solid.
“Now that we have this growth scare and pullback in stocks, it seems almost to good to resist buying,” he said. “I’m positive from a contrarian perspective. I’d be a dip buyer and put some fresh capital to work.”
Corrections are more common than bear markets. And they can be healthy, leading to more dependable gains over the long term. Think about the post-Covid-19 market correction.
The S&P 500 surged more than 20% in both 2023 and 2024 following 2022’s pullback. Corrections might seem painful at the time, but they don’t tend to last long.
“Fortunately, market corrections are usually a short-term event, occurring an average of once per year and lasting three to four months,” fund managers at Weitz Investment Management, an Omaha-based firm focusing on long-term investing, said in a report.
“The average market loss during a correction is about 13%, and historically, that loss has been recovered over a period of about four months. In the grand scheme of things, a correction can be little more than a blip on the radar for investors with a long-term focus,” the Weitz managers said.
Following the previous 15 corrections going back to 2008, the S&P 500 was up more than 15%, on average, in the next 12 months, according to Dow Jones Market Data.
Some money managers argue that it is a stretch to suggest this current selloff is the beginning of a bear market. The sudden and swift drop in stocks, as opposed to a slow and steady grind downward, seems to have all the hallmarks of a classic correction.
“The speed at which markets have declined over the past few days and weeks is a key sign that we are in a correction and not a bear market,” said John Creekmur, chief investment officer at Creekmur Wealth Advisors, in an email. “Corrections tend to be very short in duration and fast moving, while bear markets take longer to play out and their moves are not as noticeable over the very short term.”
The recent market slide has also made valuations for the broader market far more reasonable than they were earlier this year. The S&P 500 now trades for just 18 times earnings estimates for next year, slightly below its five-year average of 19 times. Only a month ago, the index was trading at about 23 times 2026 earnings forecasts, a nearly five-year high.
Dare we say it? The pendulum has fully swung from historically expensive to almost cheap. While it may sound trite to suggest that investors buy the dip, history has proven time and again that doing so is the right move for longer-term investors looking to build wealth.
