The U.S. stock market had a dismal October. The S&P 500 (^GSPC -4.36%) fell 0.9% in what has often been one of the strongest months of the year. And the Nasdaq Composite (^IXIC -5.52%) declined 5.3% as investors panicked about the sustainability of the artificial intelligence boom, representing its worst month since March 2025.
The losses have now spilled into November. On Thursday, Nov. 5, the S&P 500 and Nasdaq Composite fell 4.1% and 5.3%, respectively, erasing the post-midterm election gains and pushing the Nasdaq into correction territory. The sell-off was particularly brutal among technology companies, suggesting Wall Street is worried that Democratic victories in the midterms could slow AI spending.
However, there is a silver lining for patient investors. Historically, corrections have been an excellent time to put money into the stock market. Here are the important details.
Image source: Getty Images.
The Nasdaq has historically rebounded quickly after falling into correction territory
The Nasdaq Composite measures the performance of more than 3,000 companies listed on the Nasdaq Exchange. The index is widely regarded as a benchmark for growth stocks because it is heavily weighted toward the information technology sector.
On Nov. 5, the Nasdaq entered market correction territory, meaning it closed at least 10% below its recent bull market high. For readers curious about specific dates and numbers, the Nasdaq peaked just below 27,600 on Oct. 6, and the index has since declined 11.6%.
Corrections are never pleasant, but they are more common than investors may realize. The Nasdaq has now fallen at least 10% from its high on 10 occasions during the last decade, meaning corrections have occurred at an average pace of once per year. Fortunately, the recoveries have often been swift.
The chart below shows the Nasdaq’s 12-month return following its first close in correction.
| Nasdaq First Close in Correction Territory | 12-Month Return |
|---|---|
| October 2018 | 15% |
| June 2019 | 31% |
| February 2020 | 54% |
| September 2020 | 41% |
| March 2021 | 1% |
| January 2022 | (24%) |
| August 2024 | 25% |
| March 2025 | 24% |
| March 2026 | 19% |
| Average | 21% |
Data source: YCharts.
As shown above, over the last decade, the Nasdaq Composite returned an average of 21% during the year following its first close in correction territory. Applied to the current situation, history says the index will climb 21% to 29,421 by November 2027. That implies more than 6% upside from its previous record high.
Investors should consider buying this Nasdaq index fund
The Invesco QQQ Trust (QQQ -6.49%) measures the performance of the Nasdaq-100, a subset of the Nasdaq Composite that includes the 100 largest non-financial companies listed on the Nasdaq Exchange. The 10 largest holdings are listed by weight below:
- Apple: 8.3%
- Nvidia: 7.8%
- Microsoft: 6.7%
- Alphabet: 5.3%
- Amazon: 4.7%
- Micron Technology: 4%
- Advanced Micro Devices: 3.6%
- Tesla: 3.3%
- Meta Platforms: 2.8%
- Walmart: 2.8%
The Invesco QQQ Trust has returned 1,480% (10.5% annually) since its inception in 1999, easily outpacing the broader S&P 500, which has returned 885% (8.6% annually) over the same period. Outperformance in the Invesco QQQ Trust boils down to outperformance in the technology sector, and that trend is likely to continue.
Investors may be nervous about artificial intelligence spending, but AI itself will undoubtedly be transformative. Indeed, JPMorgan Chase strategists estimate AI adoption is happening three times as quickly as internet adoption, making it one of the fastest-adopted technologies ever. And the cost of AI is falling faster than any other transformative technology in history.
So, as the AI boom unfolds, the technology-heavy Nasdaq-100 (and the Invesco QQQ Trust) are likely to deliver strong returns. And now is a particularly good time to buy shares given that the Nasdaq Composite just closed in correction territory.
JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, JPMorgan Chase, Meta Platforms, Micron Technology, Microsoft, Nvidia, Tesla, and Walmart. The Motley Fool has a disclosure policy.
