A double-digit market correction is looming. This is what advisors need to know

Advisors have had to deal with an eventful year in the markets, marked by surging oil prices amid the conflict between the U.S. and Iran, not to mention high valuations fueled by a massive run-up in tech stocks.

The S&P 500 index, which is up 8.6% this year, has fallen 1.9% in the last month, while the tech heavy Nasdaq, which has climbed more than 10% in 2026, is off almost 5% in the last month. The VIX volatility index, which is Wall Street’s “fear gauge,” spiked in early June, and is up 15.4% in the last month.

There could be more volatility ahead, according to David Laut, chief investment officer at Kerux Financial. “We believe the market volatility seen so far in June is the tip of the iceberg, which could turn into a 10-20% correction in the broader markets, as it's been well over a year since we have seen a double-digit pullback, and conditions are ripe for one amid elevated valuations, continued geopolitical uncertainty, and low trading volume during the summer months,” he said, in a statement.

Kerux Financial’s Laut is not alone in foreseeing a correction. In a note released Friday, Paul Ciana, managing director and global head of technical strategy at Bank of America described the summer roadmap as a “three-wave correction” for the S&P 500. The break below the June 10 wave low at 7,334 on the S&P 500 reinforces that a corrective phase is underway, according to Ciana. "We see an abc correction for wave 2 unfolding toward 7,122/6,968," he said. "Be cautious if a marginal new high toward ~7,741 occurs as it may be a 'bull trap' consistent with an expanding flat."

"With summer still young, a more prolonged, double correction pattern into October remains a key risk," Ciana added. 

VOLATILITY PRESENTS OPPORTUNITIES

While volatility can be unsettling, it does present opportunities for advisors. Some 78% of the 783 financial advisors in a recent survey by tech platform for diversified investments Insperex said volatility increases client engagement and communication − and the same share said it generates opportunities for advisors to demonstrate their value.

Then there are the long-term returns that can follow spells of volatility. Research released last year by Trueshares found that, over 10 instances prior to November 2025 when the VIX surged 50% in a single month, the S&P 500 saw greater returns one year later than the historical 12-month average. 

So, what can advisors expect over the coming months? While Kerux Financial believes that a double-digit market correction is looming, Laut thinks that it may take time to play out. “We remind investors that August, only one month away, is a seasonally weak month for stocks and is a month that has seen corrections in past years,” he said, in the statement. “We believe the valuation worries the market is facing could persist for the next 4-8 weeks, especially since expectations are rising for this next earnings season.”

Set against this backdrop, the Kerux Financial CIO thinks there is plenty for advisors to do with regard to client portfolios. “Staying underweight technology stocks is the name of the game for right now as there may very well be a leadership transition going on within the sector,” he said. “Mag 7 stocks have had a disappointing run so far this year, and the market is trying to figure out its next leadership group.”

While talk about a possible correction swirls, Anthony DeGerolamo, owner of DeGerolamo Financial Strategies, urges advisors to weigh whether portfolio changes are needed. "Many financial experts expect a market correction, but the timing and severity are unknown," he said, in a post on LinkedIn. "That uncertainty makes now a good time to review your investments and determine whether changes are needed."

DIVERSIFICATION IS KEY

Kerux Financial's Laut also urges diversification, noting that small cap, international, and value stocks have all provided asymmetric returns to technology. “The same catalysts remain throughout the rest of the year: oil prices, the AI story as well as AI IPOs, and interest rates,” he added.

As for interest rates, Laut thinks it’s unlikely that we will see the Federal Reserve hike rates, given the decline in oil prices in recent weeks. “There is immense pressure on the Fed to keep rates in check and a hike would require an especially rare set of circumstances, such as a year or longer of $100 per barrel oil, and we are nowhere near that point,” he said. “Interest rates at their current levels are justified, and we believe a cut or a hike is not warranted at this time.”

Earlier this month the Federal Reserve kept to its path of keeping its policy rate steady in the central bank’s first meeting with Kevin Warsh as chair.

Advisors have been closely watching the Fed’s stance amid pressure from President Donald Trump to lower rates. The Fed made three consecutive rate cuts last year but Warsh’s predecessor as Fed Chair Jerome Powell had resisted calls from Trump to cut rates.The Fed made its last rate cut in December 2025. The new Fed chief has also inherited an inflationary environment that is hardly conducive to rate cuts, a scenario that has also sparked speculation of rate hikes further down the road. 

HINTS FROM WARSH

Warsh is now firmly in the spotlight. All eyes will be on Sintra, Portugal, on Wednesday when he speaks at the European Central Bank Forum, which may give advisors and their clients some insight into his interest rate strategy. If he reiterates prior comments about the importance of “monetary policy independence" then advisors could well expect to see the Fed continue on its current path of no rate cuts, and even possible rate hikes.