The page behind this dialog is live. Create a free account or sign in and you'll land right back on it.
The routine pullback threshold
5% pullbacks from trailing highs are common — about 3-4 per year on average since 1928. They almost never become bear markets. Useful for framing routine volatility in client conversations.
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
The S&P 500 experiences a 5% pullback roughly every 2-3 months. In a typical year, the market pulls back an average of 14% intra-year yet finishes positive 73% of the time.
The 10% long-run equity return exists precisely because investors must endure regular discomfort. Without pullbacks, everyone would own stocks and the premium would vanish.
An investor who sold after every 5% pullback and waited for a recovery would have underperformed buy-and-hold by approximately 3% per year since 1950.
Five-percent dips arrive every few months, so plan for them structurally: consider keeping the next year of known withdrawals in cash or short-term bonds so a routine pullback never forces a sale. The historical cost of exiting on every 5% decline — roughly 3% a year in foregone return — is the strongest argument for deciding, in advance, to do nothing.