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USA TODAY US Edition - - MONEY - Adam Shell

Stock mar­ket down­drafts of 5 per­cent or more can cause an in­vestor’s blood pres­sure to spike and anx­i­ety lev­els to rise. And Wall Street’s most re­cent slide – which has re­sulted in a price hair­cut of closer to 7 per­cent – has been a scary ride down.

But Wall Street has a re­as­sur­ing mes­sage for in­vestors who worry that this is more than a short-term blip: “Pull­backs are nor­mal,” says John Lynch, chief in­vest­ment strate­gist at LPL Fi­nan­cial.

In­deed, his­tory shows that mar­ket drops be­tween 5 and 9.99 per­cent for the Stan­dard & Poor’s 500 stock in­dex are more fre­quent than you might think but don’t nor­mally morph into ma­jor down­turns.

Since World War II, there have been 56 drops of this size. The pain has been bear­able, how­ever, with an aver­age de­cline of 7 per­cent and the down­turn last­ing a lit­tle more than a month, ac­cord­ing to data from Sam Sto­vall, chief in­vest­ment strate­gist at CFRA, a Wall Street re­search firm. The good news: The mar­ket re­couped its losses in a month and a half, on aver­age.

“Af­ter de­clines (like we’ve seen the past few days), in­vestors will find that a re­view of stock mar­ket his­tory will serve as a dose of ‘vir­tual val­ium,’ ” Sto­vall told USA TO­DAY.

In­vestors won­der­ing how bad things can get if the mar­ket goes down even more can also take so­lace in the per­for­mance of the mar­ket dur­ing the 22 times it has suf­fered a so-called “cor­rec­tion,” or drop of 10 per­cent or more. The aver­age de­cline was 13.8 per­cent, ac­cord­ing to CFRA, and the mar­ket re­couped its losses in 264 days, on aver­age.


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