Is this Correction Real? Plus: What’s in store for 2018?
Is this Correction Real?
The market has finally started showing signs of cracking with two big down days in a row. It has been a long time since we have had a decent pullback. The big question right now is if this is a real correction or another minor blip.
Although no one likes watching their money go down, corrections are necessary.
That may sound a bit funny so let me explain:
If everyone is bullish, there is little “ammunition” (money on the sidelines ready to invest) to push the market higher because everyone who wants to be invested, already is.
On the other hand, if there is a lot of fear and pessimism, there is a lot of ammunition. Therefore, a decent pullback of over 5% would generate a lot of distress, and make people think that a broader pullback is inevitable.
For that reason, I would love to see this thing down 5-7%. That would scare investors enough to push this market higher.
My fear is that this correction will be very short-lived, possibly only 3-5% or even less, not letting in all the money that is on the sidelines waiting for a pullback. Things look so good, people are not waiting for a sizable drop to get invested and are just buying any dip we get.
What to expect for 2018?
For the year, statistics are on our side…assuming you are a bull.
We just had the best January since 1997, with the S&P 500 up 5.62%. That bodes well for stocks this year because what is called the “January Barometer – how January goes, so goes the year”.
This indicator was right 87% of the time from 1950 – 2017 and 71.9% since 1928.
A strong January also tends to lead to a strong February. Stats show that when January is up, February is up 60.7% of the time. Conversely, when January is down, February is weaker, up only 41.2% of the time.
No matter how bullish you are, if you are a retirement investor, you simply cannot throw caution to the wind. At this point in your life you simply cannot replace this money. You need to invest more wisely as you get older, not necessarily more conservative. You must be more careful and of course be sure you are investing with a “Tactical” investment management style, never buy-and-hope.
If you are a do-it-yourselfer, it’s certainly been fun. However, you must take extra precaution because an easy market can make it look easy. It’s not just about how much you can make, it’s also about how much you can lose. If you don’t have the experience, discipline, and expertise, don’t be afraid to ask for help. Be the expert or hire one.
Contact me for a free Portfolio Review and Tax-strategy Analysis today.
Feel free to call me with any comments or questions.
Cheers -Keith Springer