Corrections

[Mac1958]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

 

[martybegan]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

The correction was timed pretty good for me, my company 401k match went in at the end of february.

Higher share count for the same $$ = win

 

[Mac1958]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

The correction was timed pretty good for me, my company 401k match went in at the end of february.

Higher share count for the same $$ = win

Dollar cost averaging!
.

 

[martybegan]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

The correction was timed pretty good for me, my company 401k match went in at the end of february.

Higher share count for the same $$ = win

Dollar cost averaging!
.

Dips don't hurt you when you are more than 20 years away from retiring. They can actually help if you contribute more when the market tanks.

Now being in your 60's when the market tanks with a portfolio mostly in stock funds can be a bit more worrisome.

At 42 though, i say let it ride.

 

[Toro]

There have been four times since WWII when stocks fell by 20% or more without a recession - 1962, 1966, 1987 and 1998.

Today, the prospective returns from stocks and pretty much all assets are at all-time lows due to QE. Global QE is still happening due to the ECB and the BoJ, but it is being unwound by the Fed. Because of nosebleed valuations, US stocks have massive embedded negative convexity.

The microstructure of the market, with the absence of traditional market makers and liquidity suppliers, the asset-liability mismatch of ETFs, and algorithmic trading means the market is fragile and can plummet quickly.

An ocean of liquidity and a strong economy provide powerful buffers against a deep drop, but we are in uncharted waters.

 

[Weatherman2020]

Inflation is the big concern causing the wobble. That is the problem with a recovering economy. Market will continue to be a roller coaster the next few months as everyone tries to figure out if things are under control or not. Damn automated buy/sell machines only add to the problem.

 

[william the wie]

This market is strange. I think a major part of why it is strange is that there is no convenient index yet of no longer deductible state and local taxes to track winners and losers by locality. Of course this year's arson season should bring a lot of clarification and a huge amplification of the differences.

 

[MarathonMike]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

Thanks for that, very interesting. I think you also have to weigh the latest 11% correction against the meteoric gains since November 2016. In my portfolio the latest correction ended up being non event. I wonder if there is another shoe to drop yet to complete the 2018 correction.

 

[Mac1958]

By the way, let's try to keep politics out of this. Anyone who ties short term market behaviors to current politics simply doesn't know what they're talking about.

Just thinking out loud about "Corrections", which I generally classify as a short-term drop of 10% or more, and very healthy for markets:

While researching some other stuff this morning, I singled out the last four Corrections and their amounts:

1. 04/23/2010 - 07/02/2010 = -15.55%
2. 04/24/2011 - 08/15/2011 = -16.06%
3. 07/20/2015 - 02/11/2016 = -13.94%
4. 01/29/2018 - 02/09/2018 = -11.34%

No specific point to be made here, but it does seem that unless you're going into a cyclical bear there is a certain limit to the severity of a Correction. Especially as markets become more and more efficient, investors seem to have a shorter and shorter patience for downturns. Buying into markets using trailing stop limits and buying back in at around -10%, if you're comfortable it's only a Correction, may not be a horrible idea.

Also interesting is that four year stretch without a Correction. Markets may be returning to a more normal state after the Meltdown. It took a long time after the Depression, too.

Haven't really thought this all the way through, but interesting to see the numbers and time frames.
.

Thanks for that, very interesting. I think you also have to weigh the latest 11% correction against the meteoric gains since November 2016. In my portfolio the latest correction ended up being non event. I wonder if there is another shoe to drop yet to complete the 2018 correction.

I think there's general agreement that we're at the tail end of a bull market, and that the only question is how much headroom we still have to grow. I've seen perfectly reasonable arguments, based on technical analysis, that give us another 30% to 35%. But you just can't know.

Here's where my thinking is at this very moment, such as it is: We're set up for another nice run of growth with moderately increasing interest rates. Everything is in order. BUT some economic numbers are STILL not where they need to be. Wages are still not growing fast enough, and there have been some negative growth numbers. If we don't see growth happening, damn soon, and if the 10-year bond stalls (I trust the bond market more than the stock market as an indicator), this could be over.

And, really, that's okay. Bear markets happen. A year or two of ugly and then we turn around again.
.

 

[william the wie]

I think Sept/Oct is when the panic will set in. Pelosi and Schumer are trying to put together a reflexive anti-Trump Congressional campaign and that will scare investors and voters a lot. More regulation, higher taxes and a weaker military will be supported by the MSM. I figure 40% down is the median probable drop.

 

[william the wie]

The bond market is getting to the point where some bonds and CDs are worth having.

 

[MarathonMike]

What is your take on the IP Tariffs plan? I'm wondering if this will be the impetus to establish a double bottom. It didn't really feel to me the 11% correction in february was a 'true' correction.

 

[william the wie]

It wasn't. Nor is this hiccup. Bloomberg, Reuters and Fox presented cases that the IP tariffs were only mentioned as perhaps a trigger for exactly when it sank in that FB had both the US and EU starting criminal investigations to go along with class action civil suits. If memory serves FB lost a GM of market cap today. Also the value of bonds relative to stocks kicked in with a vengeance later in the day.