Are We Due For a Correction?

This is a question I receive quite often.
The prediction business is a horrible one to be in and I simply do not know. But I do know, if history is any indication, then lets take a look at what we can look for.

These are the worst peak-to-trough drawdowns every year in the 2020s for the S&P 500:

• 2020: -33.9%
• 2021: -5.2%
• 2022: -25.4%
• 2023: -10.3%
• 2024: -8.5%
• 2025: -18.9%

For 2026 it’s just -3.4%*.

That’s surprising, right?

The year is still young but we have the Iran war going on, spiking oil prices, higher prices at the pump, geopolitical uncertainty, the software sell-off and more. Oh, and Canadian real estate is at 30 year record lows in terms of sales and new homes built.

Yet the market has been resilient. The TSX (Toronto Stock Exchange) is up 3.52%* and the S&P 500 is currently down around 1%* on the year at the time of writing.

What gives? Why won’t the stock market fall more in the face of all the scary headlines?

The stock market is often counterintuitive. It’s forward-looking. The short-term doesn’t always make sense. Sometimes it’s a Teflon market.

It’s possible investors are trying to avoid overreacting if this conflict is resolved in short order.

Investors have also become accustomed to ignoring geopolitical headlines that don’t have a long-lasting impact on corporate profits or the market as a whole.

For years, I have reminded clients that the market always climbs the wall of worry (literally every single time) and this time is not different.

Thinking through why markets will rise or fall in the short run can be an intellectually stimulating exercise but it’s not something that’s helpful to your investment process on a consistent basis.

Here are 5 things you can do today that are infinitely more productive for your wealth and mental health:

1. Increase monthly savings – when is the last time you gave yourself a raise?
2. Review your work RRSP plan – when is the last time you rebalanced your portfolio?
3. Create your online CRA account – find unused TFSA and RRSP room at your fingertips.
4. Review your Will, Powers of Attorney and Life insurance – Estate Planning 101
5. Call your favourite advisor any time you’re feeling anxious – he’s always happy to chat!

The stock market will fall eventually. The reason won’t matter as much as you think. That correction will end at some point. Life will go on (just like every other time before).

*These valuations were taken at the time of writing. This is not intended to provide investment advice.