Pullbacks Are Part of the Journey
Hoxton Blog • Pullbacks Are Part of the Journey
It was a bumpier week in markets, and it is worth keeping it in proportion.
Between Monday 12 and Friday 16 October, investors had plenty to digest. On Wednesday, US inflation figures for September came in hotter than expected, driven largely by higher petrol and energy prices, with oil still above $100 a barrel amid tensions in the Middle East.
That revived talk that interest rates may have to rise further. At the same time, technology and computer-chip shares came under pressure, with sharp falls in Asia spreading to the US. This week we want to put those moves in context, using a chart that shows just how ordinary setbacks like these really are.
What Happened This Week
The week started quietly. On Monday and Tuesday the US stock market moved very little, as the big banks kicked off the latest round of company results with a mixed set of numbers. Memory-chip makers slipped, on news that a Chinese competitor is making faster progress than expected.
Wednesday was the most uncomfortable day. The inflation report showed consumer prices rising 3.7% over the past year, a little above forecasts.
The S&P 500, the main index of large US companies, fell by about 1%, and the technology-heavy Nasdaq by almost 2%, as investors worried that higher interest rates could weigh on the most richly valued growth companies.
On Thursday, falls in chip shares across Asia were steep, but in the US the mood steadied. Money moved out of technology and into more defensive areas such as healthcare and everyday consumer companies, and the broad market finished the day higher.
Put together, by Thursday's close the US market was only around 1% lower for the week, and still close to the record highs it reached earlier in the autumn. The headlines felt louder than the actual moves.
The Bigger Picture Behind the Pullbacks
The chart below shows the S&P 500 since October 2021, a year before the low point of the 2022 bear market. The shaded sections, and the dots that mark their start and end, highlight every “pullback” since that low, meaning every time the market fell by 5% or more from a previous high before recovering.
Two things stand out. First, the overall direction. Since its low on 12 October 2022, the S&P 500 has more than doubled, from around 3,580 to more than 7,700.
Second, how often that progress was interrupted. Over those four years the market went through eight separate pullbacks of 5% or more, roughly two a year. Some were brief, such as the dips in the spring of 2024 and late 2025.
One was severe: in the spring of 2025, the index fell by close to 20% in a matter of weeks as trade tensions flared. Another came only this year, between January and March 2026. Each one felt, at the time, like it might be the start of something worse. Each time, the market went on to recover and reach new highs.
Seen against that chart, this week's wobble barely registers. It has not even reached the 5% threshold that would earn it a mark of its own.
Not Every Dip Is Small
As always, a word of balance. We cannot know whether this week's nerves will fade quickly or develop into a larger fall. Inflation running above target, the prospect of higher interest rates, high oil prices and lofty expectations around artificial intelligence are all real concerns, and any of them could trigger a bigger pullback in the weeks or months ahead. The chart itself shows that some setbacks are sharp and genuinely unsettling to live through.
So we would not suggest reading this chart as a promise that every dip will be shallow, or that the recovery will always be quick. What it does show is that pullbacks are a normal, regular part of how markets grow, not a sign that something has gone wrong. A rising market has rarely been a smooth one.
The Principle Underneath: Volatility Is the Price of Growth
There is a simple trade-off at the heart of investing. The long-term growth that shares have delivered, well ahead of cash and inflation, comes with periods of discomfort along the way. The two cannot be separated. The occasional fall is, in effect, the price of admission for the gains over time.
The investors who tend to fare worst are often not those who experience a pullback, since everyone invested does, but those who react to one: selling after a fall out of worry, and then missing the recovery that follows. Looking at the chart, an investor who sold during any of those eight dips would, in every case, have sold at a lower price than the market reached afterwards.
This is why we build portfolios the way we do for our clients at Hoxton: spread across many companies, many industries and many countries, so that a sell-off in one area, such as this week's fall in chip shares, is cushioned by others.
Indeed, this week offered a small example in action, as healthcare and consumer companies rose while technology fell. We do not need to know when the next pullback will come, nobody does, and a well-built portfolio does not depend on it.
And a Word on Staying Invested
It is worth adding, as we often do, that the surest way to miss out on the long upward path shown in this chart is to sit on the sidelines in cash. This week was a reminder that the cost of living is still rising, and money left in a bank account slowly loses value, buying a little less each year.
The strongest days in markets often arrive soon after the worst ones, and they rarely announce themselves in advance. Being invested when they arrive matters far more than trying to step aside at the right moment.
Our Message This Week
This week brought hotter inflation figures, renewed talk of higher interest rates and a sell-off in technology shares. Yet by Thursday's close the US market was only around 1% lower, still close to its record highs.
The chart shows that since the October 2022 low, the market has more than doubled, while going through eight pullbacks of 5% or more along the way.
The lesson, as ever, is not to let a difficult week, or even a difficult month, drive your decisions. Pullbacks are a normal part of the journey, not a reason to leave it. You simply need to stay diversified, stay invested, and let time and the long-term growth of businesses work quietly in your favour.
As always, if you would like to talk through what any of this means for your own plan, we are here to help.
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