{"id":9574,"date":"2021-05-10T13:53:34","date_gmt":"2021-05-10T13:53:34","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9574"},"modified":"2022-02-26T13:05:52","modified_gmt":"2022-02-26T13:05:52","slug":"are-we-overdue-for-a-market-correction","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/are-we-overdue-for-a-market-correction\/","title":{"rendered":"Are We Overdue For A Market Correction?"},"content":{"rendered":"\n<p>U.S. stocks have been trending solidly higher for over a\nyear, with very few episodes of sustained downside volatility. From the bottom\nof the March 2020 Covid-19 bear market to the end of 2020, the S&amp;P 500\ncharged +68% higher. In Q1 2021, the index rose another +6.2%, again with no\nmaterial pullbacks. I don\u2019t want to spoil the fun, but these types of extended winning\nstreaks aren\u2019t that normal.<sup>1<\/sup><\/p>\n\n\n\n<p>Since 1980, the S&amp;P 500 has experienced an average\nintra-year drop of -14.3%. As you can see from a chart below of the S&amp;P 500\nover the last year (from May 1, 2020 to May 1, 2021), however, the equity market\nhas not even come close to that kind of pullback. There was a patch of downside\nvolatility during the late fall in 2020, but it did not produce a pullback of\nmore than -10%. In fact, there has not been a double-digit pullback yet in this\nnew bull market.<sup>2<\/sup> <\/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_2021_05_10&amp;content=stock_market_outlook_report \">How Should Investors Prepare for a Double-Digit Correction? <\/a><\/strong><\/p>\n\n\n\n<p>The best\nway to prepare for the possibility of a stock market correction is to prepare\nmentally, maintain a well-diversified portfolio, and stay focused on the hard data, so you do not\nmake emotional decisions when the market experiences a sharp and sudden\npullback. <\/p>\n\n\n\n<p>To help\nyou stay focused on key data points and fundamentals that could impact your\ninvestments in the long term and help you prepare for a correction, I am offering\nall readers an exclusive look at our May Stock Market Outlook Report. This\nreport contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks\nRank S&amp;P 500 Sector Picks<\/em><\/li><li><em>Economic\nexpectations for the rest of the year<\/em><\/li><li><em>Zacks\nMay view on equity markets<\/em><\/li><li><em>The\nImpact of Covid-19 vaccine <\/em><\/li><li><em>U.S.\nreturns expectations for 2021&nbsp;<\/em><\/li><li><em>What\nproduces 2021 optimism?<\/em><\/li><li><em>Sell-side\nand buy-side consensus<\/em><\/li><li><em>And\nmuch more<\/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> <strong><br>IT\u2019S FREE.<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_05_10&amp;content=stock_market_outlook_report \">\u00a0Download the Just-Released May 2021 Stock Market Outloo<\/a><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_6_29&amp;content=stock_market_outlook_report\"><strong>k<\/strong><\/a><strong><sup>3<\/sup><\/strong><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong>S&amp;P 500 from May\n1, 2020 to May 1, 2021<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/pic200-1-1024x395.png\" alt=\"\" class=\"wp-image-9576\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>Am I claiming impending doom for U.S. stocks? Of course not.\nMy outlook for equities is still positive based on our expectation of\nbetter-than-expected earnings and growth in the new year. But in my view, it\ndoes mean now is a good time to mentally prepare for a stock market correction.\nAnd I should make one thing clear before I go any further: <em>a pullback of -10% or more would not be cause for concern, in my view<\/em>.\nJust the opposite \u2013 I would see a correction as a sign of a normal, healthy bull\nmarket. <\/p>\n\n\n\n<p>Let\u2019s take a look back at the 2008 Global Financial Crisis\nbear market for a good example. When the bull market started in March 2009, the\nS&amp;P 500 rallied +63% from the bottom through the end of the year \u2013 very\nclose to the +68% rally following the Covid-19 bear. In 2010, which was the\nsecond year of that bull market, the S&amp;P 500 endured an intra-year\ncorrection of -16%. The correction was scary at the time, but also healthy \u2013 the\nmarket finished up +13% in 2010.<sup>5<\/sup> We have seen this very regularly\nthroughout history, where the second year of a bull market is choppy but also\nfinishes positive. I could see a similar outcome in 2021.<\/p>\n\n\n\n<p>So, how should investors prepare for market volatility or a\ndouble-digit correction? Using history as a guide, I would offer two pieces of\nadvice:<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li>Mentally prepare for a correction now, so when\nit arrives, you expect it and can avoid making any knee-jerk, reactive\ndecisions. <\/li><li>Review your current allocation to ensure your portfolio\nis well-diversified, which to me usually means investing across different asset\nclasses, styles, sizes, and even regions. A broadly diversified portfolio can\n\u2018smooth out the ride\u2019 during market pullbacks. <\/li><\/ol>\n\n\n\n<p>At Zacks Investment Management, these pieces of advice are\nalready baked into our investment decision-making process and our approach. We\nbuild diversified investment portfolios for every client based on their needs\nand their goals, and we manage assets within the portfolio based on proprietary\nresearch derived from Zacks Investment Research. In other words, we do not\nleave any room for emotional, reactive decisions, which is precisely where\ncorrections tend to drive investors. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>The point of talking about the possibility of a stock market\ncorrection now is not to try and predict when the correction will arrive or to\nmake a plan for trading in-and-out of the market during it. I do not recommend\ndoing either. <\/p>\n\n\n\n<p>Thinking about the possibility of a stock market correction\nsimply helps us prepare mentally for a sharp and sudden pullback so that when\nit arrives, it does not tempt us into some knee-jerk portfolio response. Corrections\nare normal, healthy features of bull markets and equity investing in general.\nWe should treat them as such. <\/p>\n\n\n\n<p>So instead of living in fear of a correction and potentially making knee-jerk, emotional decisions as a result, prepare your investments for the long-term by focusing on key data points and economic indicators that could positively impact your investments in the future.<\/p>\n\n\n\n<p>To help you do this, I am offering all readers our<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_05_10&amp;content=stock_market_outlook_report \">\u00a0<\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_05_10&amp;content=stock_market_outlook_report \">Just-Released May 2021 Stock Market Outlook Report.\u00a0<\/a><\/strong><\/p>\n\n\n\n<p>This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Zacks\nRank S&amp;P 500 Sector Picks<\/em><\/li><li><em>Economic\nexpectations for the rest of the year<\/em><\/li><li><em>Zacks\nMay view on equity markets<\/em><\/li><li><em>A\nlook at the Covid-19 vaccine tracker update<\/em><\/li><li><em>A\nlook at U.S. returns expectations for 2021&nbsp;<\/em><\/li><li><em>What\nproduces 2021 optimism?<\/em><\/li><li><em>Sell-side\nand buy-side consensus<\/em><\/li><li><em>And\nmuch more<\/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!<br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Signs look good for equity growth in 2021, but investors should be ready for a market correction along the way <\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71,1],"tags":[],"class_list":["post-9574","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9574","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=9574"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9574\/revisions"}],"predecessor-version":[{"id":10399,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9574\/revisions\/10399"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}