Correction or Bear?
Many of you are aware that the U.S. and International stock markets have been very volatile over the last few weeks. We are officially in “correction territory” which is long over due. A correction is when the stock market experiences a 10% to 20% drop, but then rebounds and resumes its bull (up) trend. This correction began at the end of January when investors became concerned about rising inflation and has continued as the tariffs on China were announced along with new regulation on some companies. On average corrections last about 200 days. The correction is officially over when the index that has experienced at least a 10% drop returns to its original value. With the average length in mind, this volatility may continue for a few more weeks and may even possibly reach new lows.
Will this correction turn into a bear market (a drop in the stock market of 20% or more)? Our opinion is no. The main reason for this opinion is the U.S. and world economy is in great shape and looking to continue to improve. U.S. fourth quarter GDP was just revised up form 2.5% to 2.9%. Unemployment is low, wages are increasing and the Federal reserve is planning to increase rates over the next year but keep them low.