Market Volatility: Why Long-Term Investors Shouldn't Panic About the Current Market Correction

Market Dips Can Be Unsettling—But They’re a Normal Part of Investing

The recent 10% market correction has investors worried, but history tells us that staying the course is the best move. Market downturns happen regularly, but long-term investors who stay invested tend to come out ahead.

In this post, we’ll break down why market volatility isn’t a reason to panic, what’s driving the recent correction, and why maintaining a long-term view is crucial.

What’s Driving the Current Market Volatility?

1. Tariff Concerns & Trade Policy Uncertainty

Recent tariff escalations have shaken markets, causing uncertainty in global trade. Here’s what’s happening:

New Tariffs Announced: 25% tariffs on steel and aluminum, new tariffs on Chinese goods, and proposed 25% tariffs on EU imports.
Economic Impact: The Tax Foundation estimates that these tariffs have reduced GDP by 0.23% and cost the U.S. over 179,800 jobs.
Consumer Costs: American consumers have paid over $82 billion in additional costs since 2018 due to these trade policies.

Bottom Line: Investors dislike uncertainty, and shifting trade policies are causing market swings.

2. Tech Stocks Were Overvalued & Are Now Adjusting

The recent correction has hit tech stocks particularly hard. Before the correction:

The tech sector’s average price-to-earnings (P/E) ratio had climbed to 34.6, far above the historical average of 21.
Nvidia, one of the biggest winners of the AI boom, hit a staggering P/E ratio of 85.
Analysts at Goldman Sachs expect AI investments to total over $1 trillion by 2025, but short-term profit pressures are weighing on stock prices.

What’s happening now? The correction has brought valuations down to more reasonable levels, positioning the sector for more sustainable growth.

Market Corrections Are Normal—Here’s What the Data Says

1. How Often Do Corrections Happen?

According to Ned Davis Research, since 1950:

The S&P 500 has had 23 corrections of 10% or more.
A 10% correction happens approximately once every 1.9 years.
Bear markets (drops of 20% or more) have happened 11 times in the past 75 years.

Translation: This is not unusual. It’s part of the market cycle.

2. Markets Recover Faster Than You Think

The average 12-month return after a correction is +25.1%.
87% of corrections result in positive returns the following year.
The median recovery time from a 10-15% correction is 4 months.
Even for steeper 15-20% corrections, the median recovery is just 7 months.

3. The Cost of Trying to Time the Market

Attempting to sell stocks before a downturn and buy back at the bottom rarely works. Here’s what J.P. Morgan’s research shows:

Missing the 10 best days in the market over 20 years slashes total returns by 50%.
Miss the 20 best days? Your return drops to just 2.6% per year.
Miss the 30 best days? You actually lose money.

And here’s the kicker: The best days in the market usually happen within two weeks of the worst days. That means if you panic and sell, you’ll likely miss the recovery.

Long-Term Investors Win the Race

Despite short-term volatility, history tells us that staying invested is the best strategy. The market has spent 76% of its time in bull markets since 1926.

The long-term trend? The S&P 500 has grown over 16,000% since 1950.

What Should You Do Now?

Stay Invested: The data proves that patient investors are rewarded.
Avoid Market Timing: It’s nearly impossible to get it right.
Reassess Your Risk Tolerance: If you’re losing sleep, your portfolio may need adjustments.
Keep Emergency Savings: Having cash reserves means you won’t be forced to sell stocks at the worst time.
Diversify: A well-balanced portfolio helps reduce volatility.

If you’re feeling uneasy about your investments, talk to a professional. At Fox Hill Wealth Management, we help investors navigate market turbulence with data-driven strategies.

Want to know more? Contact us today, and let’s ensure that your portfolio is positioned for long-term success.