The markets are often composed of ups and downs and, while it can be difficult to predict the future, it can be helpful to formulate a worst-case scenario to plan ahead. At the end of November 2020, the S&P 500 was sitting at more than 3600, with an all-time-high of more than 3690. Despite this, analysts have put together a scary scenario for the index in which it could plunge as low as 2200, or up to 30% lower than that it was at the end of 2020.
This is a decline that raises many questions. What could cause such a sharp fall? What could such a fall mean for those with investments in the S&P 500? Could the index really drop that low?
The risk associated with a large fall of that magnitude is associated with the potential of a market correction. A market correction is defined as a decrease of 10% or more from the highest layer. These have occurred due to various economic events such as unexpected inflation, rapid descent in corporate earnings or sudden shifts in public sentiment.
That being said, no one can really know when or if a market correction will occur, and whether or not it would cause a 30% drop in the S&