LPL: Why Market Pullbacks In 2025 Have Been Shallow And Short

Periods of market volatility often give long-term investors the chance to add high-quality assets at better prices. Historically, “buying the dip” has rewarded those willing to stay active when markets wobble. But since the trade-policy-driven pullback in April, meaningful corrections have nearly disappeared. As markets have rallied sharply from the spring lows—led by high-beta and risk-on segments—the rarity and short duration of pullbacks has caught investors’ attention. Below, we take a closer look at what’s been happening.

A Market With Few “Discounts”

From the beginning of May through early November, the deepest retreat in the S&P 500 was a modest 4.2% decline from the index’s all-time high. That brief window didn’t appear until November 7. Put another way, even with perfect timing, an investor seeking the best possible entry point since April would have only captured a 4.2% pullback.

Any investor waiting for a 5% decline—or deeper—would still be sitting in cash. While the index itself isn’t directly investable, ETFs that track it would have delivered nearly identical conditions. The chart titled “Shallow and Short ‘Dip Buying’ Opportunities” illustrates how narrow these opportunities have been.

How This Compares With Recent Years

Between 2020 and 2024, the S&P 500 fell at least 10% from record highs three different times. Across those years, the average drawdown during good buying opportunities was 7.8%. Since April 2025, that figure has collapsed to just 1.1%. Even if an investor bought at the exact intraday low on every “discount day,” their price advantage would still average only 1.1%.

And it hasn’t just been shallow—the declines have been fleeting. The index has been setting fresh highs frequently, with the longest stretch without a new high being only 10 trading days. On average, pullbacks have lasted just 3.5 days. By comparison, from 2020 through 2024 there were 14 periods in which the market needed at least 10 days to reclaim previous highs, and drawdowns lasted more than 15 days on average.

Why Dips Have Been Limited

Several forces have supported the market’s strength:

• Stronger-than-expected economic data

• Healthy corporate earnings

• Reduced trade tensions

• An environment of ample liquidity

Momentum and technical strength have fueled market advances, making it harder for deeper or longer-lasting corrections to develop. Interestingly, retail investor behavior may also be playing a role. A persistent fear of missing out (FOMO) on upside performance has kept “dip buyers” active—often stepping in so quickly that any declines are cut short.

How Investors Can Respond

The key is maintaining discipline. Staying invested, keeping a structured asset allocation plan, and using regular investment contributions can help manage volatility—especially in an environment where meaningful pullbacks are rare. Rebalancing periodically can also help capture opportunities as they arise.

Tactical Positioning

The Strategic and Tactical Asset Allocation Committee (STAAC) continues to hold a full equity allocation in tactical model portfolios, matching benchmark weights. The current view favors:

• Large cap equities over small caps

• Growth stocks over value

• Balanced exposure to U.S., developed international, and emerging markets

Within fixed income, the Committee is maintaining a neutral stance on core bonds, with a slight preference for mortgage-backed securities (MBS) versus investment-grade corporates. Core sectors—including Treasuries, agency MBS, and high-quality corporate bonds—remain more attractive than extended-risk segments.

The Committee monitors markets frequently in search of better entry points, though these have been harder to come by in 2025’s persistent rally.

Read More at: https://www.lpl.com/research/blog/why-market-pullbacks-in-2025-have-been-shallow-and-short.html