You Should Expect A Stock Market Correction in 2020

You Should Expect a Stock Market Correction in 2020

Since late 2018, the stock market has raced higher. Along the way, it has hardly missed a beat. This year looks to be a very interesting year. But we should all be prepared for a reset of sorts. Today on Monday Morning Money, we’ll tell you why you should expect a stock market correction in 2020.

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A Quick Note:  This episode was recorded early last week.  We had no idea that the stock market would drop as rapidly as it did.  We officially entered correction territory last thursday. 

A Normal Part Of Investing

Why should you expect a stock market correction in 2020?  We have no real knowledge of impending doom or anything like that. Sure, we are dealing with the Coronavirus, and last week we saw the Stock Market react harshly to the ongoing news.  In addition, we are also dealing with a lot of political stuff.

In the past 40 years, there has been an annual price decrease of at least 7% a total of 33 times.

The textbooks define an official correction as a 10% decrease in stock prices. That has happened in 21 of the past 40 years—more than half of the time.

The average calendar year price drop since 1980 is 14%. And the stock market has had calendar year declines of that much—or more—15 times.

You Should Expect A STock Market Correction
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A Stock Market Correction Doesn't Mean A Bad Year

Of the past 40 calendar years, with all of those annual adjustments, how many times was the stock negative for the year? Seven.

Since 1980, the stock market posted a negative year seven times. That’s about 1 out of every five years. The average total return for stocks over that same time frame was 11.8% per year.

Download The Stock Market Correction Infographic

We created this infographic to show you the frequency and magnitude of annual stock market corrections.  Click on the button below do download your copy.

Expect Stock Market Correction

When You Expect A Stock Market Correction, You Can Make Better Decisions

These interruptions are normal. They are the rule, not the exception. The “reasons” why rarely matter, but how you react to the downturn does.

When we expect a correction, it makes us better investors. We can prepare ourselves for the possible downturn. And that can help us focus on making good decisions in what can be a stressful moment.

Tell yourself, “It’s gonna happen.” When it does, be disciplined and follow your plans. And that will help you avoid the mistakes that could cost you far more in the long run.

Schedule a 15 Minute Call

Do you have a question? Would you like to talk about how we can help you plan for a better retirement?
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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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