The Market's Crashing: Is It Time to Buy or Sell?

The S&P 500's record highs last month are becoming a distant memory as stocks post their worst days in years this week. Is this the start of a bear market or an opportunity to buy?

In this clip from The Motley Fool's Industry Focus: Healthcare, analyst Kristine Harjes and contributor Todd Campbell discuss the market's recent decline, how it compares to declines in the past, and what could be next for investors.

A full transcript follows the video.

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This video was recorded on Feb. 6, 2018.

Kristine Harjes: It's been a crazy week so far. Warning, we're actually filming this on Tuesday, so it's only the 6th as we're recording. But yesterday, Monday, the Dow Jones Industrial Average lost 1,175 points, which is the most number of points it has lost ever. And for me, that's the largest percentage drop that I've seen since I've been in this business. The last time we had a drop that was this large in terms of the percentage of the Dow was in August 2011, during the euro debt crisis. And I don't know what it was like for you and the conversations you were having, Todd, especially since you're working remotely, but around the office there was a lot of buzz. It reminds me of how fortunate we are to have a Foolish, long-term philosophy, because the sentiment was mostly positive. People across The Fool are cheering at the fact that stocks are going on sale.

Todd Campbell: I have enough gray hair on my head to remember the 2011, the 2008, the 1999. We have seen this before. I think, to put things into context for listeners, a 4.1% drop on Monday is scary as far as the S&P is concerned, but it's certainly not unprecedented. I went back, Kristine, and I crunched the numbers. Since the market's low in 2009, March of 2009, the S&P has fallen on 17 different occasions by 3% or more. Seventeen. So, it's tough to look at a down-4% day, and you start going, "Oh my God, am I owning the right things?" It throws a lot of curve balls at your willingness to stay Foolishly focused. But this is not new territory. Despite all of the 17 times that we've been here before since 2009, we still went on to put in new highs on the stock market. So staying focused on great stocks for the long haul, that's the best approach.

Harjes: To loosely quote Motley Fool co-founder David Gardner, stocks will go down a lot faster than they go up, but over a long enough amount of time, they will go up way more than they'll go down. So, like you said, Todd, this is not terribly unusual. Another interesting stat that I came across is, the S&P 500 has had 35 drops of at least 10% since 1950. That's about one every two years. The last correction we had was about two years ago. So you could kind of surmise that we're due. This is not terribly surprising, and it's not really a bad thing. It's just how this all works.

Campbell: 10% corrections, like you said, they're pretty common. And if you look at the S&P and where it peaked in January, we almost got down to the 10% correction point over the course of a couple trading days. I think it was 2,587. So, within a hair.

Harjes: And who knows what's going to happen the rest of today, Tuesday, or tomorrow, Wednesday, when the show gets released. We might be crossing over that threshold.

Campbell: And it can be sloppy trading, Kristine, but I even did the numbers over the course of the ensuing 30 days following those 17 drops that we've seen since 2009, and even if you just look out 30 days, the average in the median return a month later is still between 3% and 5%. Patience is typically rewarded, and it could be rewarded as quickly as within a month, if that helps our investors stay Foolishly focused.

Harjes: And speaking of being patient, The Motley Fool as a whole is working on putting together a comprehensive set of tools to help our readers and listeners and members think about a market crash. So stay tuned, we'll be sure to let everyone know how you can access these materials as soon as we have it ready. But do know that we have you guys in mind, and we'll be putting out something in the very near future.the very near future.

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