From a new all-time closing high on Monday to the worst day of the year so far on Wednesday, S&P 500 appears to have decided to take the low road.
If today’s selloff was solely the result of political jitters triggered by a string of blunders by the new administration, then the market could easily bounce right back. Alternately, the market could be reacting to some “Sell in May” jitters, political instability, monetary policy tightening and some buying exhaustion. In this case then a 10% correction is not out of the question.
On average, since 1949, S&P 500 has experienced a 10% or greater pullback about once every 1.4 years. S&P 500’s last correction ended on February 11, 2016 after it slipped 14.2% in 266 calendar days. S&P 500 is not overdue for a correction, but it certainly is near historical average duration between them.