In Markets "In a Nutshell"

Markets “In a Nutshell” for October 30, 2023

Investment Week at a Glance

Stocks finished lower for the week.  The Dow Jones Industrial Average fell 2.14%, the S&P 500 was down 2.52%, and the NASDAQ fell 2.62%. Foreign stocks (MSCI EAFE) were also down, falling 0.77%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.85%.  (Data source: Morningstar)

Market Pullback

After a strong late spring/early summer rally, U.S. stocks have been on a downtrend since August with broad stock market indexes dropping 10.7% since August 1st. Bonds have been hit also (as interest rates have spiked up) with the broad bond indexes down 5.2%. While these downtrends most certainly are not enjoyable, stock and bond market corrections are part of market cycles and have the function of bringing frothy markets down to more reasonable valuation levels. They also serve to provide opportunities for investors to buy quality investments at lower prices. Let’s take a look:

  1. As part of normal market up and down cycles, we should expect to periodically see market downturns.
  2. There are generally three types of market downturns.
  3. Market pullbacks (5%-10% down) occur, on average, about three times a year.
  4. Market corrections (10%-20% down) occur on average about every 1.2 years while rarer bear markets (20%+ down) are once every 7 years or so.
  5. Over longer periods of time (1993-2023) stocks have an average annual return of 9.9%.
  6. Bonds over the same time period returned 4.2% on an average annual basis.
  7. After such a strong period of returns from 2009-2021 (stocks up 14% a year, bonds up 7% a year), it is not unusual to see the volatility in the markets since 2022 to bring markets into historically normal returns.
  8. Markets have always historically rebounded from periods of downturns.
  9. According to Morningstar, once a market correction is over, stocks gain an average of 10.1% in the following year.
  10. Since accurately predicting the exact timing of when a correction will end is difficult, staying invested (according to your specific goals and objectives) through market ups and downs is usually the best course of action.


Investment market downturns, while not enjoyable, are part of normal market cycles. Patience has historically been the course of action for investors as downturns have always turned into the next leg up in stock and bond markets. Downturns also offer investors opportunities to buy at lower prices. As always, market cycles need be put in context of individual goals and objectives.