Yesterday we noted that the S&P 500 hadn't tumbled into correction territory - meaning it wasn't yet down 10 percent or more from its recent peak. But that situation ended on Monday, when the index lost 3.9 percent, to close 11 percent below its May 21 record close of 2,131. That ended the S&P 500’s fifth-longest correction-free streak ever.
What does that mean for the future? If history is any guide, that means there is a good chance that a 20 percent selloff is coming, which would put it into bear market territory. Following the last correction-free streak, which ended after a record of about 84 months in October 1997, the S&P 500’s decline peaked at 10.8 percent, which would seem to bode well for this sell-off.
However, the other three streaks that were longer than the current one ended with eventual declines of 22 percent, 34 percent and 57 percent. The average overall decline of the those declines was 31 percent. Let's hope history does not repeat itself.
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