Data: Nasdaq Gains 13.6% 6 Months After Corrections
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- Three of four major US stock indexes — the Dow Jones Industrial Average, Nasdaq Composite, and Russell 2000 — entered correction territory (10% decline from all-time highs) over the past few weeks, while the S&P 500 fell about 9% without crossing the threshold
- Russell 2000 Index was the first to close at a 10% loss from its all-time high on March 20, marking its 24th correction since 1979
- After a correction signal, the Russell 2000 has averaged a 1.57% loss in the following two weeks, though the recent signal bucked the trend with a 4%+ gain in the two weeks after March 20
- The Russell 2000's one-year average return after a correction is 6.19% with 57% of returns positive, compared to a typical 10.65% return with 71% of returns positive over a normal year
- The Nasdaq Composite reached correction territory on March 26, and has historically averaged a slight 0.35% loss in the first month after a correction signal, with average losses of 9.21% versus a typical 4.68%
- The Nasdaq averages a 13.6% return in the six months following a correction with 73% of returns positive, well above its typical six-month return of 6.3% and 70% win rate
Why it matters: Investors and pundits treat the 10% correction as a significant psychological marker, but the historical record shows the threshold is arbitrary — short-term returns tend to underperform while six-month Nasdaq returns have averaged 13.6% with a 73% win rate, suggesting the level matters more for headlines than for actual market direction.
