{"id":8849,"date":"2020-09-16T20:10:13","date_gmt":"2020-09-16T20:10:13","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8849"},"modified":"2022-02-26T13:06:31","modified_gmt":"2022-02-26T13:06:31","slug":"are-we-heading-for-a-market-correction","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/are-we-heading-for-a-market-correction\/","title":{"rendered":"Are We Heading for a Market Correction?"},"content":{"rendered":"\n<p>The first week of September rattled equity investors. The\nNasdaq dropped over -6% in two days leading into Labor Day, and at one point\nhad fallen -10% from its high in intra-day trading. In a single day, Apple Inc.\nshed $179.92 billion off its market cap, marking the biggest one-day loss for a\nU.S.-listed company ever. For context, Apple\u2019s $180 billion single -day loss\nis bigger than the individual market capitalizations of <em>470 of the 500\ncompanies in the S&amp;P 500.<sup>1<\/sup>&nbsp;<\/em><\/p>\n\n\n\n<p>The question now is: will the selling pressure in the equity\nmarket spin into a full-on correction, or maybe worse? Yes and no, in my view. <\/p>\n\n\n\n<p>The stock market has seen an impressive bounce off the\nbottom of the pandemic-induced bear market. Upside volatility tends to invite\ndownside volatility, particularly in areas of the market that did the best off\nthe bottom (namely, Technology). That\u2019s the nature of investing in the stock\nmarket \u2013 just as investors get comfortable with a rally, the equity market\nfinds a way to deliver a reality check. The market never fails to test investor\npatience. <\/p>\n\n\n\n<p>Many investors are likely wondering if the selling pressure\nis likely to continue, and when it might be a good time to get in \u2013 or get out\n\u2013 of the market. My advice is to do nothing. <\/p>\n\n\n\n<p>______________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_9_14&amp;content=stock_market_outlook_report\">How Can You Prepare for a Potential Market Correction?<\/a><\/strong><\/p>\n\n\n\n<p>Time and time again, we have seen investors make knee-jerk,\nemotional reactions in response to a crisis or sudden market change. This\nrarely turns out well, in my view. So, while many investors are wondering what\nthey should do in anticipation of a potential market correction and how they\nshould respond to protect their investments, my advice is not to make any\ndrastic moves and instead to stay\ncalm and focus on the fundamentals and the hard data. <\/p>\n\n\n\n<p>To help\nyou do this, I am offering all readers our just-released Stock Market Outlook\nreport. This report contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks Rank Sector &amp; industry forecasts<\/em><\/li><li><em>What should you think about COVID19 era jobs data?<\/em><\/li><li><em>Status of global energy markets<\/em><\/li><li> <em>What of US GDP growth?<\/em><\/li><li><em>U.S. returns expectations for 2020\u00a0<\/em><\/li><li><em>What produces 2020 optimism?\u00a0<\/em><\/li><li><em>And much more.\u00a0<\/em> <\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0<br> <br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_9_14&amp;content=stock_market_outlook_report \">IT&#8217;S FREE. Download the Just-Released September 2020 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_9_14&amp;content=stock_market_outlook_report \">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>______________________________________________________________________<\/p>\n\n\n\n<p>The early stages of bull markets are often volatile and come\nwith a backdrop of fairly weak and inconsistent economic data. Jobs are still\nbeing lost, manufacturing and spending activity rebound early only to taper\noff, and in the current year, a consequential U.S. presidential election looms.\nData from the CBOE Volatility Index (VIX) shows that in the last seven U.S.\npresidential elections, the VIX has risen an average of four points in the\nmonth leading up to election day.<sup>3<\/sup> Short-term volatility is to be expected.<\/p>\n\n\n\n<p><strong>No Sudden Movements<\/strong><\/p>\n\n\n\n<p>While near-term downside volatility is almost assured, long-term\ninvestment strategies should not attempt to factor-in the <em>possibility <\/em>of pullbacks. Doing so would mean taking the bait of\nshort-term market timing, which is something I never recommend doing. <\/p>\n\n\n\n<p>In the current environment, there is fear building-up about\na potentially messy election and an uneven and\/or faltering economic recovery. But\nthe risk here, in my view, is allowing thoughts of \u2018worst-case scenario\u2019 outcomes\nto dictate how you manage your investment portfolio. I think it is critical now\nto keep your feelings about the pandemic and the election separate from your\ninvestment decision-making process. &nbsp;&nbsp;<\/p>\n\n\n\n<p>The disconnect between what people expect to happen and what\nactually happens has already been a major feature of 2020. The \u2018worse than the\nGreat Depression\u2019 pandemic forecasts did not come to fruition. Corporate\nearnings and revenues, for example, took big hits in Q2 2020, but 79.7%\nof S&amp;P 500 companies beat consensus earnings-per-share estimates and 62.9%\nbeat revenue estimates. On a blended basis, 55.7% of companies exceeded\nexpectations, which represents a very strong showing relative to recent\nhistory.<sup>4<\/sup> The pandemic\u2019s impact on earnings was not as bad as most\nfeared, and stocks rallied over the summer.<\/p>\n\n\n\n<p>It is notable that the equity market\u2019s surge higher was\ndriven by Technology stocks, and the market\u2019s decline is being led on the way\ndown by some of the same companies. It is tempting in this case to think the\nentire S&amp;P 500 is at the mercy of Big Tech, but I would not overcommit to\nthat line of thinking.<\/p>\n\n\n\n<p>Over time, we know that leadership in the equity markets\nchanges hands often. Technology stocks led throughout the 1990s, but took far\nlonger than other sectors to establish new highs in the next decade. Emerging\nMarkets was the best performing asset class in the 2003 bull market, but lagged\nsignificantly in the 2009 \u2013 2020 bull market. Over the last ten years, the top\nperforming asset classes have been Small Caps (2010), REITs (2011), High Yield\nBonds (2012), Small Caps (2013), REITs (2014), REITs (2015), Small Caps (2016),\nEmerging Markets (2017), Cash (2018), and Large Caps (2019). Interestingly for\nthe Technology sector, which is comprised largely of Growth stocks, we also\nknow that Value stocks tend to outperform Growth stocks over long stretches of\ntime.<sup>5<\/sup> In short \u2013 stay diversified. <\/p>\n\n\n\n<p><strong>Bottom\nLine for Investors <\/strong><\/p>\n\n\n\n<p>In my view, the current investment\nenvironment has all of the classic marks of a correction \u2013 a short-term, sharp\npullback with a characteristic disconnect: investor sentiment souring based on\na widely-known fear, as economic fundamentals quietly improve in the\nbackground. <\/p>\n\n\n\n<p>No one can tell you how long the downside volatility will\nlast, whether it will trigger a full-on correction of -10% to -20%, or what\nareas of the market will outperform on the downside. Claiming otherwise is just\nguesswork. <\/p>\n\n\n\n<p>Sell-offs often provide strategic opportunities to rebalance\nportfolios, and if your asset allocation needs adjusting based on a change to\nyour long-term goals or needs, now may be a good time to consider it. Otherwise,\nmy advice is to stay patient and do nothing. <\/p>\n\n\n\n<p>To help you focus on the big picture and the fundamentals instead of the fearsome headlines, I am offering all readers our\u00a0<strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_9_14&amp;content=stock_market_outlook_report \">Just-Released September 2020 Stock Market Outlook Report.\u00a0<\/a><\/strong><br> \u00a0<br> This Special Report is packed with newly revised predictions that can help you base your next investment move on hard data. For example, you&#8217;ll discover Zacks\u2019 view on:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li> <em>Zacks Rank Sector &amp; industry forecasts<\/em><\/li><li><em>What should you think about COVID19 era jobs data?<\/em><br><\/li><li><em>Status of global energy markets<\/em><br><\/li><li><em>What of US GDP growth?<\/em><br><\/li><li><em>U.S. returns expectations for 2020\u00a0<\/em><br><\/li><li><em>What produces 2020 optimism?\u00a0<\/em><br><\/li><li><em>And much more.\u00a0<\/em> <\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<sup>6<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>While conditions point toward a correction, trying to time the market is almost always a mistake<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8849","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8849"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8849\/revisions"}],"predecessor-version":[{"id":10546,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8849\/revisions\/10546"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}