Market declines — A little history
Stock market declines are a natural part of investing, but they’re also the last things most investors want to experience. Here is some historical background to help you put market declines in perspective.
Types and frequency of stock market declines
Declines have varied widely in intensity, length and frequency. While in the midst of one, it’s been nearly impossible to tell if you’re seeing a slight dip in the market or the beginning of a more prolonged correction.
The table below shows how frequently declines in the Dow Jones Industrial Average have occurred since 1900. As you can see, while declines have varied widely in intensity, length and frequency, they have also been somewhat regular events.
A history of declines
(1900 – June 2009)
| Type of decline | Average frequency1 | Average length2 | Last occurrence3 | Last occurrence pre-March 2009 |
|---|---|---|---|---|
| -5% or more | About 3 times a year | 48 days | March 2009 | March 2008 |
| -10% or more | About once a year | 115 days | March 2009 | March 2008 |
| -15% or more | About once every 2 years | 217 days | March 2009 | March 2008 |
| -20% or more | About once every 3-1/2 years | 338 days | March 2009 | October 2002 |
Source: The unmanaged Dow Jones Industrial Average
- 1
- Assumes 50% recovery of lost value except for the most recent decline (10/09/07 - 3/09/09), which has not yet recovered 50% but is included in the average
- 2
- Measures market high to market low
- 3
- Current market decline may not be over
Investing in a volatile market
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Three lessons from market declines
Past market declines can provide meaningful lessons and perspective.
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Thoughts from three of our investment professionals
Three veteran American Funds portfolio counselors talk about current strategies and how they view the future.
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Recessions: keeping your perspective
We’re in the midst of the 14th recession since 1931. See the timing and duration of the first 13.
Return to topInvestors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus and/or summary prospectus, which can be obtained from your plan’s financial professional or downloaded and should be read carefully before investing.