Is it safe to come out now?
The stock market has found firmer footing following its breathtaking drop earlier this month, when the S&P 500 lost 10.2 percent in just nine days. Stocks climbed Tuesday for the third straight day, and the S&P 500 is now down 7.3 percent from its record high, set on Jan. 26.
But investors have seen this playbook before. Even in past recoveries, it has sometimes taken months or more for momentum to fully turn around.
Here’s a look at what history shows about past corrections, and what market watchers are expecting going forward.
Q: How bad was this market drop?
A: Drops of 10 percent or more for stocks are regular occurrences but the speed with which this last correction struck was unusual. Only 19 times since World War II has the S&P 500 lost at least 10 percent in 10 days or fewer, according to strategists at UBS.
Besides this month’s sell-off, those rapid retreats include a drop in August 2015 sparked by worries about slowing economic growth for China and a plunge in August 2011 after the U.S. credit rating got downgraded from AAA and worries about Europe’s debt crisis were near their peak.
Q: What happened after the last such corrections?
A: Months of muddling along.
In August 2015, the S&P 500 lost 11.1 percent in six days. That was followed by two straight days of big gains, each at least 2.4 percent, a sign that the worst could be over.
But stocks ended up bobbing higher and lower for months. The market recovered all its losses by November, only to fall back into correction territory again by the ensuing January. It took 15 months for the index to climb 5 percent above where it was when the August 2015 slide began.
After the 2011 correction, where the S&P 500 fell 11.2 percent in three days, it took nearly three months for the index to claw back all its losses.
Q: Before this month’s drop, analysts were saying the stock market was expensive. Is it cheap now?
A: It’s cheaper, but not necessarily cheap.
Analysts look at several measures to…