Last Thursday — Nov. 5 — the S&P 500 (SNPINDEX: ^GSPC) index plunged 4.4%, its worst day since April 2025.
That seems pretty scary, certainly to newer investors who might not have seen many market pullbacks. But investors shouldn’t worry, as occasional small corrections and pullbacks in the market undo excess and prevent larger corrections down the road. They’re a normal, healthy way for the market to avoid asset bubbles and reset overextended valuations.
Image source: Getty Images.
The market’s valuation had gotten quite high before the pullback. The Shiller cyclically adjusted price-to-earnings (CAPE) ratio reached 41 earlier this year, a high it’s only seen once before in history and far above the 32 level seen just before the 1920 crash.
Market dips and minor corrections are extremely common, too. Research by CPA firm Adams Brown shows that between 1928 and 2024, there was at least one 10% correction per year on average, more than three 5% mild corrections, and about seven 3% dips.
Such market pullbacks can also create opportunities. They offer new, more attractive entry points for many stocks that were too expensive to consider before the market drop.
Today’s Change
(-1.08%) -81.73
Index Level
7,510.67
Key Data Points
Day’s Range
7,499.40 – 7,621.78
52wk Range
6,316.91 – 7,844.52
That’s exactly why the market rebounded in the two trading days that followed the drop, as investors jumped back in to buy the dip and the market clawed back much of what it lost on Thursday.
There’s an old saying on Wall Street: Small forest fires prevent large forest fires. Investors need to realize that volatility is the price we pay for strong gains, and look past minor dips.
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