Here’s our Club Mailbag email investingclubmailbag@cnbc.com — send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week’s question: I’m a pretty recent Club member, but I have found your insights great. My question: With the S & P 500 continuing to rise, do you anticipate a bubble burst or a pullback? The economic indicators are not great, but the market seems to be gaining momentum, which can be a bad combination. — Jim We avoid making big calls on the market’s direction. Corrections will happen, but their timing and duration are nearly impossible to predict. We don’t pretend to have a crystal ball. Nobody does. Instead, our investment decisions are driven primarily by the fundamentals of the companies we own and the valuations the market assigns to them. Our job is to find great long-term stories and buy in when the stock prices appear undervalued, not attempt to time when others might start buying. We focus on investing in the right companies over the next six to nine months and beyond. We are always invested. Market moves A correction is defined by a decline of 10% or more from all-time highs. A bear market is measured by a drop of 20% or more from record highs. That’s not to say fundamental investors should be ostriches, sticking their heads in the ground and avoiding the big picture and market trends. Instead, investors should always be prepared, understanding that corrections, even bear markets, are inevitable. And that starts and ends with our cash stake, and ensuring we have enough on hand to take advantage of buying and selling opportunities, depending on which direction the market moves. If the market has been hot, or if the backdrop has deteriorated, we’ll increase cash levels. If the market has been in a rut or we expect good news, we’ll look to get some cash to work. That’s not so much about anticipation as it is about disciplined investing, characterized by booking profits and opportunistically reducing the cost basis, while acknowledging that with every move up or down, the risk/reward profile changes. For decades, Jim has used the Short Range S & P Oscillator to help navigate these choppy waters. Every time we mention the Oscillator, we’re flooded with requests from Club members: “How can we access?” Well, we went directly to the source, our partners at MarketEdge, the data provider that publishes the Oscillator. We’re excited to share that Club members can now get an exclusive discount for this helpful tool. Click here . To show why we are long-only investors who aim to buy low and sell high, let’s look at the stock market over a 30-year timeframe. Our goal here is to zoom out and get a real sense of how long these painful pullbacks need to be tolerated. The past doesn’t promise the same in the future. However, history often rhymes, barring the so-called Black Swan events such as the dot-com bubble bursting in the early 2000s or the 2008 financial crisis. We see in this chart of the State Street SPDR S & P 500 Trust ETF , commonly referred to by its ticker symbol SPY, periods of pain but an upward trajectory over time. The letters on the chart represent the approximate time periods to full recovery for the events listed here. A. Dotcom crash: It took about seven years to return to the pre-crisis level. Of course, we then walked right into the financial crisis and the Great Recession. B. Financial crisis: Getting back to the pre-crisis highs took just under six years. C. Chinese growth scare, Greek debt default, and end of quantitative easing : It took about a year to recover from the confluence of these events. D. 2018 Taper Tantrum : The result of hawkish commentary from then-Federal Reserve Chairman Jerome Powell took about six months to recover from. E. Covid pandemic : It was one of the most volatile markets in history. However, it also recovered from some incredible losses within about six months. F. 2022 inflation and aggressive rate hikes : The lingering effects of Covid-related supply chain disruption caught up to the market and sparked the greatest bout of inflation in 40 years. That, in turn, catalyzed the most aggressive Fed rate-hiking cycle ever and a bear market. However, it got back to 2021 levels by the end of 2023. G. Trump’s 2025 tariff announcement : The market round-tripped this sharp decline in about six months, and it has not looked back since. On average, over the past quarter-century, we need to be prepared for a roughly 2½-year downturn. Remove either the dotcom bust or the financial crisis, and the average time to get from one high, through a trough, and back to that old high drops to 1.8 years, or about 22 months. Another important takeaway is the time each market took to reach its bottom. Understanding the duration of market declines helps inform how much risk you are willing to tolerate. An investor in their 20s with decades of work ahead is likely to ride out even the worst market decline, whereas someone six months from retirement might want to play it more conservatively. A. Dotcom crash: 2¼ years to bottom out B. Financial crisis: 1½ years C. Chinese growth scare, Greek debt default, and end of quantitative easing : 8 months D. 2018 Taper Tantrum : 3 months E. Covid pandemic : 2 months F. 2022 inflation and aggressive rate hikes : 10 months G. Trump’s 2025 tariff announcement : 2 months The bottom line: Expect downturns, prepare to buy high-quality companies as they get cheaper, and stay disciplined. As famed investor Peter Lynch once said: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” (See here for a full list of the stocks INJim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Stock market corrections will happen: Here’s how we navigate the ups and downs
Jun 1, 2026
