US Stocks Crash: Will the S&P 500’s correction turn into a bear market?

The S&P 500 has officially entered correction territory, which means it is now more than 10% below its recent high of 6,144.15 set on February 19. According to Dow Jones Market Data, it has been the fastest peak-to-correction movement since the six trading days during the beginning of the Covid-19 pandemic in March 2020.

The US stocks which saw back-to-back rallies in 2023 and 2024 have faced big pressure from global investors in 2025. Much of the fall can be attributed to Trump’s policies, which the market believes will harm the economy and company profitability.

The S&P 500 reached a new high just three weeks ago, on February 19, thanks to robust earnings reports that helped offset concerns about escalating tariffs. Since then, equities have plummeted as President Trump has threatened, imposed, and delayed tariffs, adding to the uncertainties. Some experts worry that these tariffs could raise consumer prices and hinder economic growth.

The uncertainty surrounding Trump’s tariff proposals continues to raise alarm on Wall Street, and his trade war only worsened last week. The only good news was that the United States has recently avoided another government shutdown.

Some experts believe that market corrections can be beneficial since they allow investors to buy companies at reduced prices.

Corrections of 10% are frequent, but they rarely result in a bear market, as would occur if the S&P 500 plummeted 20% from its peak. Some big tech stocks, like those in the MAG 7 group, have fallen significantly.

Although corporate earnings have been a little softer recently, they remain relatively healthy. Consumer demand remains strong, however inflation expectations are increasing.

In the real economy, inflation is declining. The US Federal Reserve is expected to hold interest rates unchanged on March 19, while three rate decreases are projected for 2025.

But, the million-dollar question remains – Where does the S&P 500 go from here after entering the correction zone?

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S&P 500 Prediction 2025

Past data shows that since 2008, stocks have historically dropped in the first month after the S&P 500 entered the correction zone, with the index returning an average negative 1.7% after 30 days.

However, stocks have tended to return over longer time frames, with the S&P 500 gaining an average of 2.1% over the next three months and nearly 5% over six months, according to Dow Jones Market Data.

Interestingly, since 2008, the large-cap index has averaged an outsized 15.3% increase one year after the first close below the correction level.

This also implies that markets are forward-looking. From now on, existing issues such as Trump tariffs, the US economy, and Fed rate cuts will shape the market returns for investors.

Also Read: US Fed rate cut expectations rise after inflation shows falling trend