3 Reasons a 5% Market Pullback May Be Imminent
I think a 5% market pullback is coming, perhaps in the next two months. When it comes, it could be a good thing.
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3 Reasons a 5% Market Pullback May Be Imminent
I think a 5% market pullback is coming, perhaps in the next two months. When it comes, it could be a good thing.
July 16, 2025•
Chris Preston

I’m generally an optimist, especially when it comes to the stock market. And if I ever feel myself getting pessimistic or negative about the market, I try and remember what my old boss, and Cabot legend, Tim Lutts used to say: “In investing, it pays to be an optimist.”
He’s right, and he has more than a century’s worth of evidence to prove it. The average annual return in the 129-year-old Dow Jones Industrial Average (which opened in May 1896) is roughly 10%, about the same as the S&P 500’s average annual return since its March 1957 founding. Stocks’ very nature is to go up, and up by a double-digit percentage every year. So, if you’re an eternal market pessimist, you’ve likely missed out on some big, and potentially life-changing, returns.
With all that in mind, I’m here to tell you that I think the market is due for a pullback. In saying so, however, I don’t think I’m violating Tim’s “be an optimist” credo. Pullbacks are normal, even healthy. Pullbacks are generally short-lived and fall short of the more nefarious “correction” designation, reserved for when the market falls by at least 10%.
I don’t think a market correction is necessarily imminent.
We just experienced a very sharp market correction – and a brief bear market, in the case of the Nasdaq and the Russell 2000 – in early April, just over three months ago. It feels like it happened much longer ago than that. But that’s because the market has had a furious, V-shaped rally since, not only erasing all of the late-March/early-April losses but taking it to fresh all-time highs.
