Markets in 2024 started strong in the middle of a bull market, but experienced a market correction around the beginning of May. What does this mean for your investments in the stock market?

The financial industry has a lot of terminology to define actions in the markets. (See: What is a bull vs. bear market?) Here are a few to clarify what financial analysts are saying:

Bear market: A decline in the S&P 500^® Index of 20% or more from its recent peak.

Bull market: When the S&P 500 Index starts increasing from the lowest point, the industry calls the time between that and the next peak as a bull market.

Market correction: A decline in the S&P 500 Index by 10–20%

Recession: A significant decline in economic activity that is spread across the economy and that lasts more than a few months.¹

S&P 500 Index: The S&P 500 Index is a market-cap weighted index that represents the average performance of a group of 500 large-capitalization stocks.

Historically, bull markets have lasted longer than bear markets (5.6 years versus 1.2 years) and have grown more than bear markets have declined. It’s important to know, bear markets and recessions don’t always align—a recession may occur in the middle of a bull market and a bear market can occur outside of a recession.
 

Exercising patience

Timing the market to buy when prices are low and sell when they’re high is difficult. It is very tempting to buy as markets are climbing and to sell when markets experience a downturn. If you exercise patience and keep your investments the same even when markets are increasing or decreasing, you avoid the risk of missing out on market surges that tend to follow declines.

For example, if you invested $10,000 in the broad U.S. stock market at the start of 2009, it would grow to more than $70,000 by the end of 2023, as seen with the graph below.
 

Market returns captured over a long period of time may be driven by just a few days of strong performance. They also often come on the heels of a market correction. Staying invested with patience and avoiding the temptation to time the market may give you the best chance to take advantage of those strong performing days, especially after a correction. The graph below demonstrates the importance of being invested during the best days of the market: