Key Points
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The Nasdaq Composite closed more than 10% below its record on Nov. 5, its third correction this year.
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Nasdaq corrections happen about once every two years, and the index has usually been higher 6 and 12 months later.
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About a third of corrections have turned into bear markets, so investors should be prepared for more volatility.
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It’s been a rough few weeks for tech stocks, to put it mildly. On Nov. 5, the Nasdaq Composite closed about 12% below its record set on Oct. 6, officially putting the tech-heavy benchmark in correction territory for the third time this year.
The correction has had several causes. Some have been earnings-driven. For example, investors have started to question how much more Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) can spend on AI after both missed earnings estimates, and Intel‘s (NASDAQ:INTC) stock collapsed about 30% in a single day after weak guidance. Plus, the recent election results have caused investors to fear that the AI infrastructure build-out will be forced to slow down, as several high-profile elected officials are calling for data center construction moratoriums.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Of course, nobody knows what the market will do next. But history can tell us what has usually happened after corrections like this one.
Image source: Getty Images.
Corrections are more common than you might think
A correction is generally defined as a decline of at least 10% from a recent high, and the Nasdaq has experienced a lot of them. According to a Reuters analysis of LSEG data, the Nasdaq Composite entered a correction after a new high 24 times in 44 years, or about once every 1.8 years. This year has been especially choppy. The Composite was in correction territory in March and again in July, and it went on to set new records both times.
The short term is unpredictable. The longer term has been better.
In the month after the Nasdaq Composite first closes 10% below its high, its average return has been slightly negative, according to Schaeffer’s Research, which analyzed data dating back to 1971. But six months out, the index has averaged a 13.6% gain and has been higher 73% of the time, more than double its typical six-month return.
The one-year picture is even more encouraging. After the dozen Nasdaq corrections since 2011, the index has gained an average of 22% over the following 12 months, and has been higher in 11 of the 12 cases.
Of course, some corrections get worse
Notice the “11 of the 12 cases” in that last sentence. That one exception is a good reminder that corrections don’t always stay corrections. Investors who bought the January 2022 correction were down another 24% a year later, as the decline turned into a full-blown bear market. According to Dow Jones Market Data, about 37% of Nasdaq corrections since 1971 have become bear markets, defined as declines of 20% or more from the previous high. Source
We’ve seen several of those in recent years, including 2018, the COVID-19 crash in 2020, the 2022 bear market, and last year’s tariff-driven sell-off, when the Nasdaq fell about 24% from its December 2024 high. Even then, the index set a new record by late June 2025.
What I’d do now
In short, history suggests corrections have usually been better times to buy than to sell, but it doesn’t promise the bottom is in. Nobody can reliably predict where the market or any specific stock will stop declining and reach an inflection point.
Here’s a fun fact. The Nasdaq Composite has turned $100 into roughly $25,700 since 1971, averaging about 10.5% per year in gains before dividends, despite dozens of corrections along the way. And trying to time your exit can be costly. Hartford Funds found that missing just the 10 best days in the S&P 500 over the past 30 years would have cut an investor’s returns roughly in half, and most of the best days came during bear markets or shortly after.
With all that in mind, I’m not selling anything in this volatile market. If you need money from your portfolio in the next few years, this is a good reminder that it shouldn’t be in volatile tech stocks or the stock market in general. But for long-term money, I’m sticking to my plan and using the pullback to add to a few beaten-down stocks I own and buying a few that have been on my watch list.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again
In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. If you’d invested $5,000 then, you’d be sitting on $2,601,484 today.*
Now, for the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. It’s a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast.
Continue »
*Stock Advisor returns as of November 5, 2026.
Matt Frankel, CFP® has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Intel. The Motley Fool has a disclosure policy.
