Market corrections are good buying opportunities, says Goldman Sachs — but only when this happens
A January that is set to be the worst in more than a decade is nearly in the books. So what now?
The first point is that corrections are not uncommon. Since 1928, there have been corrections greater than 10% during 62% of years. 2021 was unusual since the biggest drawdown was just 5%.
The bad news is the S&P 500 SPX, +2.43% typically falls by an average of 15% peak-to-trough during the 21 non-recession corrections since 1950. There would be more selling to come, given the S&P 500 has only dropped 10% from its Jan. 3 peak.
The good news is that S&P 500 corrections are typically good buying opportunities. Of the 33 corrections of at least 10% since 1950, the median episode has lasted about five months, and encompassed a peak-to-trough decline of 18% — but an investor buying the S&P 500 10% below its high would’ve gained a median return of 15% during the subsequent 12 months.
@TransAmericanFriendship
