Is a market correction coming?

April 04, 2017
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Would a 10% pull back really be a bad thing? 

There’s plenty of talk surrounding the next move in the markets.  It’s no surprise.  The current bull market has just celebrated its eighth anniversary. Should that leave us worried?  Since the crash of 2008-9, we’ve only seen four pullbacks of 10% or more (defined as corrections).  This is not typical.  With mostly only upward movement, it’s easy to see why investors may be a little on “edge”. 

As we’ve said many times, trying to predict or time the market is a fool’s game.  Market corrections do occur.  History suggests that long-term investors are rewarded for remaining rational during emotional times (…staying on your long-term plan, despite the media noise).  So how will you prepare for what might be a few months that could be a bit bumpy?  Our best advice is to do nothing---no matter how hard the talking heads try to convince you otherwise. 

How much would a 10% drop, or higher, in the Dow Jones be? 

Remember this ---a 2,000 point pullback on the Dow (or a drop on 10%, or more), would return us to early November 2016.  Not a big deal right? 

Nevertheless, count of the media to use words like “CRASH, PLUMMET, DISASTER, and WORST SINCE…”.   Don’t feed into the media machine.  Stay calm – and contact us if you’re feeling tremors.  In our opinion, if you’re a long-term investor, the best is yet to come. 

Don’t forget corrections are normal! 

Volatility is a normal part of the market.  In fact, the average correction is about 14%, according to Standard and Poors.  Remember a favorite quote that we love from Warren Buffet is: “In the short term the market is a voting machine, in the long-term the market is a weighing machine.”  Voting can be emotional, weighing determines the value. 

And, let us share with you the wisdom of Peter Lynch; his quote: 

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections than has been lost in corrections themselves.”     

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

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