Markets
Beyond the headlines: how to navigate a market correction
July 2025
The Wall Street Journal
Those who have followed the markets will know that just over two months ago we went through a period of marked volatility and correction.
At that moment, the S&P 500 had accumulated a decline of nearly 20% from its previous high. The Nasdaq and the Russell 2000 were already officially in bear market territory. The press was talking about new tariffs, rising trade tensions, persistently high interest rates, and signs of a global slowdown.
All of this intensified after Donald Trump’s announcement on April 2—dubbed by some as “Liberation Day”—which triggered a nervous reaction in the markets. There was widespread selling and a sense of uncertainty. Some analysts compared the moment to what was experienced in 2018, others even to 2008.
But it is important to put all of this into perspective: we are talking about how things felt back then, at the peak of the correction. The markets, as they have so many times before, decided to write a different script. Today we see new all-time highs. The S&P 500 recovered its losses. The Nasdaq climbed strongly again. Some assets that were “dead” are now leading the year’s returns.
What changed? Very little structurally. But a great deal in terms of the narrative.
And that is precisely what this article is about: how to understand—and overcome—market corrections. How to avoid falling into the fear trap. And why investing, beyond the headlines, remains a bet on the future.
It wouldn’t be the first time we’ve lived through something like this. Let’s remember what happened in 2020.
While half the world was emptying supermarkets and the other half was learning how to use Zoom, the financial markets experienced one of the most brutal drops in recent history. In just 22 days, the S&P 500 plummeted 34%.
Nobody knew how long the pandemic would last. Nobody knew how many companies would withstand the lockdowns. Nobody knew if we would ever return to “normal.”
The prevailing feeling was one of great uncertainty, with doubts about how long the crisis might last. And yet, just five months later, the same market that had panicked had already recovered all its losses.
Companies adapted. People regained confidence. And the investors who stood firm were rewarded.
It was not the first time, nor will it be the last, that a correction seems like the beginning of a catastrophe. Because if history teaches us anything, it is that, time and time again, noise, fear, and uncertainty are just part of the process. The key is to know how to recognize it and to have the discipline to keep betting on the future.
The following chart shows some of the negative headlines and crises that markets have faced over time, along with the performance of the S&P 500 index.
Market corrections always arrive with the same emotional intensity, no matter how many we have lived through or how much we understand financial cycles. When headlines turn alarmist and prices fall day after day, that feeling arises that, this time, everything is different. As if the financial world were on the brink of collapse.
It is an almost instinctive reaction: the mind clouds over, decisions paralyze, and anxiety grows. We wonder whether we should sell, protect ourselves, or simply flee. But even though the uncertainty is overwhelming, history teaches us that these storms are part of the path to growth.
The historical context that provides perspective
Since 1980, the US market has recorded average intra-year drops of 14.1%, according to data from J.P. Morgan Asset Management. However, in 34 of the last 45 years, the S&P 500 closed in positive territory. Debt crises, bank collapses, pandemics, trade wars, and inflationary spikes have shaken the markets time and again. Each event, at the time, seemed insurmountable. But the global economy, guided by innovation and human resilience, has always known how to recover.
J.P Morgan Asset Management
Not every market drop turns into a bear market. corrections, defined as declines of 10% to 20% from a recent peak, are a normal part of the market cycle. In contrast, bear markets, with drops greater than 20% and recoveries that can take years, are usually linked to deep economic crises, such as recessions or systemic collapses.
This distinction is crucial so as not to confuse a temporary scare with a structural problem.
Consider some historical examples:
1929: The collapse that triggered the Great Depression led the market to lose 86% of its value. The recovery took more than 25 years, a reminder that worst-case scenarios are possible, but exceptional.
1987: The “Black Monday” caused a 22% drop in a single day. However, three years later, the market had doubled in value.
2008: The global financial crisis global caused the S&P 500 to lose 57%. Those who weathered the storm saw their investments not only recover, but multiply over the following decade.
2020: The COVID-19 pandemic COVID-19 caused a 34% drop in just one month. Against all odds, the market recouped its losses in only five months.
Each episode reinforces a fundamental truth: human progress, while interrupted by crises, has so far prevailed.
What to do during a correction?
Corrections are not the time to improvise, but to stick to a well-designed strategy. A good investment strategy is built in advance, based on: financial situation, goals, investment horizon, and risk tolerance.
Abandoning that strategy in the midst of panic usually leads to selling at the worst moments, realizing losses and missing out on future recoveries. To strengthen an investment portfolio during a correction, these practical actions can be considered:
Ensure liquidity: Maintain cash reserves to cover emergencies without having to sell assets at depressed prices.
Diversify intelligently: Combine stocks, bonds, alternative assets, and exposure to global markets to reduce risks.
Portfolio rebalancing: Periodically adjust asset allocation to maintain the desired risk level.
Invest systematically: “Dollar-cost averaging” allows you to buy more when prices are low, smoothing out the impact of volatility.
Optimize taxes: Consider selling assets at a loss to offset tax gains (Tax Loss Harvesting), always within a strategic plan.
These tools, applied with discipline, will help you navigate the turbulence without losing sight of your long-term goals.
Opportunities in the crisis, but with judgment
Warren Buffett’s famous advice—“be fearful when others are greedy and greedy when others are fearful”—is powerful, but it requires nuance. Taking advantage of a correction does not mean buying any asset just because it is “cheap, how much further can it fall?” or “it fell more than the others.” The key is to be more selective than ever: focus on assets with solid fundamentals, resilient business models, healthy balance sheets, and a real ability to adapt and grow in challenging environments.
During crises, most assets depreciate and some even disappear entirely. Some assets lose value temporarily; others, definitively, ending up worth zero.
A low price does not guarantee a good investment; quality does. For example, during the 2008 crisis, companies like Apple or Amazon, which then seemed risky and suffered sharp declines, proved to be winning bets for those who trusted their long-term potential. On the other hand, companies that seemed like “blue chips” such as Lehman Brothers, Bear Stearns, AIG, or General Motors ended up being bailed out, undergoing restructuring, or disappearing.
It is true that opportunities arise in these moments, but it requires patience, analysis, and discipline.
Uncertainty is part of the game
Investing means accepting the unknown. No one can predict the bottom of a correction, the start of a recovery, or the next event that will alter the markets. That is the nature of equities: a reflection of real-world risks and opportunities. However, history shows that human progress always finds a way, overcoming crisis after crisis. That is why investing is betting on a future that, despite being uncertain, continues to move forward.
As Howard Marks said: “When it comes time to buy, you probably won’t feel like doing it.” That discomfort is the price of great opportunities.
Betting on the future
Investing is not just a matter of numbers; it is a bet on human capacity to innovate, adapt, and overcome challenges. It is trusting that, despite the storms, humanity will continue to solve problems and create value.
As Warren Buffett stated after the 2008 crisis: “It has never paid to bet against America. We come through, but it’s not always a smooth trip.”
As asset managers, our mission is not to make heroic moves or predict every twist and turn of the market. Our job is to analyze scenarios, assign probabilities, and build portfolios that deliver risk-adjusted returns. More importantly, it is to support our clients so they stay the course, even when the market noise is deafening. Of course, one’s individual risk profile must be taken into account before investing.
Investing is not about avoiding the highs and lows, but about preparing to navigate them. With discipline, diversification, and a long-term vision, we are not just betting on the markets, but on something much bigger: human ingenuity and its capacity to build the future.
Article written by Alvaro Sucre and Michael Marciano. Edited by Roberto Vainrub.
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