After a strong six-month run for stocks, it’s worth remembering that pullbacks are a normal part of investing. Markets don’t move in straight lines, and short-term declines don’t prevent long-term growth. Below, we highlight what history shows about how often pullbacks occur and what investors can reasonably expect over the course of a year.
3-10% pullbacks are totally normal
On average, the S&P 500 experiences multiple 3% and 5% pullbacks each year. Corrections of 10% happen about once per year, and a drop of 15-20% or more can be expected once every two years. Importantly, these market fluctuations generally don’t stop the market from rising over the long-term. In fact, stocks fell nearly 20% in the first four months of 2025, yet still finished the year up 16%.
The real experience of this data is the way many investors naturally engage in mental accounting. You log into your account and see a balance — say $500,000. The next time you check, it’s $480,000, a 4% decline. That drop can feel unsettling, even when nothing about your long-term plan has changed.
Moves like this are very common. If you check your account a few times each month, you’re almost guaranteed to notice these short-term fluctuations. But history shows that despite periodic pullbacks along the way, the odds have favored accounts finishing the year at higher values than where they started.
Since 1980, the S&P 500 has averaged an intra-year drop of 14% but has posted positive returns in 35 out of 46 years returning 12% per year.
It’s also important to remember that the chart above uses the S&P 500 as a proxy for the stock market. Most client portfolios are diversified and do not move in lockstep with the index. For example, while the S&P 500 declined 19% at its worst point last year, the average diversified portfolio experienced a peak-to-trough decline closer to 11%.
Why 2026 could be bumpy in the first half
2026 is off to a good start, but 2025 began that way too before a pullback took hold early in the year.. One of the reasons the market could soon experience one of those normal 3-5% pullbacks is that most people expect stocks to keep going up.
In a recent consumer survey, a majority of respondents expect stock prices to be higher one year from now. Historically, when this reading has moved above 50, stocks have often seen some near-term weakness before recovering. In that sense, consumer confidence tends to move inversely with markets — periods of pessimism have often coincided with stronger returns, while widespread optimism can limit near-term upside.
One final observation: 2026 is a midterm election year. Historically, these years have tended to experience larger-than-usual pullbacks, particularly in the first half. Since 1950, the S&P 500 has averaged an intra-year decline of about 17.5% during midterm years. The good news? The index has gone on to average gains of more than 30% in the year following such pullbacks.
We share these historical patterns not to alarm, but to educate. Understanding that pullbacks are a normal part of investing can help set expectations and reduce the urge to make emotional decisions during periods of volatility. Even when markets do experience downside along the way, history shows they tend to move higher over time — and today’s environment remains supportive of long-term growth.
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