Nasdaq Market Correction: History Is Clear About What Happens Next
Key Points
The Nasdaq Composite is currently in correction territory, something that has historically represented an excellent buying opportunity.
In the last decade, the Nasdaq Composite has returned an average of 21% during the 12-month period following its first close in correction territory.
One way investors can position their portfolio to benefit is by buying shares of the Invesco QQQ Trust, an index fund that tracks the Nasdaq-100.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
The Nasdaq Composite (NASDAQINDEX:^IXIC) has created substantial wealth for patient investors. The technology-heavy index achieved a total return of 1,170% (13.5% annually) over the last 20 years. But extreme growth often goes hand in hand with extreme volatility.
On Nov. 5, the Nasdaq dropped more than 5%, erasing nearly $2.5 trillion in market capitalization, marking the largest one-day decline in history. That left the Nasdaq down 11.9% from the high reached just one month earlier, putting the growth-focused index in correction territory.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
The drawdown was caused by anxiety about the artificial intelligence boom. Several Democratic candidates who had expressed reservations about AI and data construction projects won midterm elections at both the state and federal levels, making greater scrutiny a distinct possibility.
Even so, there is good news for patient investors. Corrections have been excellent buying opportunities in the past and history says the Nasdaq will move much higher in the next year. Here are the important details.
Image source: Getty Images.
History points to substantial upside in the Nasdaq Composite
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 around 27,600 on Oct. 6, and dropped 11.9% to 24,315 by Nov. 5. The index has since rebounded to 25,210, leaving it about 8.6% below its high.
The chart lists every Nasdaq correction over the past decade, and it provides the index's 12-month return following its first close in correction territory.
| 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. Note: The return since March 2026 is marked with an asterisk because a full year has not yet elapsed, meaning the final percentage is subject to change.
As shown above, the Nasdaq Composite suffered nine market corrections (excluding the current one) during the last decade. The index returned an average of 21% over the 12-month period following its first close in correction territory.
What does that imply? The Nasdaq closed at 24,315 when it first hit correction territory earlier this month. If its performance matches the historical average, it will advance 21% to 29,420 over the next year. That implies nearly 17% upside from its current level of 25,210.
Importantly, while past performance is never a guarantee of future results, investors have another reason to expect strong returns over the next year. The Nasdaq-100, a subset of the broader Nasdaq comprising 100 large non-financial companies, trades at 29.3 times earnings, slightly below its five-year average of 30.4 times earnings.
The present valuation is particularly compelling because it has historically correlated with forward returns of 12.2% over the next year.
How investors can capitalize on potential upside in the Nasdaq
Investors looking to capitalize on the Nasdaq market correction have a few options. They could purchase shares of the Fidelity Nasdaq Composite ETF (NASDAQ:ONEQ), a fund that measures the performance of the index. It returned 9.8% annually over the last five years and carries an expense ratio of 0.21%.
Alternatively, investors could buy shares of the Invesco QQQ Trust (NASDAQ:QQQM), a fund that measures the performance of the Nasdaq-100. It returned 11.3% annually over the last five years and carries an expense ratio of 0.18%. Given its better performance and lower fees, I would choose this index fund over the broader Fidelity Nasdaq Composite ETF.
Should you buy stock in NASDAQ Composite Index right now?
Before you buy stock in NASDAQ Composite Index, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NASDAQ Composite Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $341,966!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,146,819!*
Now, it’s worth noting Stock Advisor’s total average return is 852% — a market-crushing outperformance compared to 203% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of November 10, 2026.
Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Recommended Articles
