Mitch on the Markets

April 17th, 2017

Why I’m Rooting for a Market Correction

Share
Subscribe

Many readers likely did a double-take after seeing the title of this week’s post. Maybe you thought, wait a second – Mitch Zacks is actually rooting for a market correction? Since when do we want the market to go down?

Let me set the record straight. I dislike market corrections just as much as the next guy. Corrections are almost always scary, sudden declines in the market that are surrounded by bad news and ominous forecasts. Not fun. And for investors who dread market corrections, you are not alone – studies have shown that investors dislike losses about twice as much as they enjoy gains.

That all being said, I have also been a professional investor for the better part of 25 years, so I know that market corrections are a normal, healthy part of bull markets. Since 1980, the S&P 500 has experienced an average intra-year decline of -14.1%. That is not a small number, and it speaks to how frequently investors have to cope with declines. I’ve certainly seen a lot of them over the

years, and they rarely come without challenges to your patience and fortitude.

With the market’s strong run since the election (up around 10% as of this writing), and given the fact that we have not seen a real market correction of -10% or more since last January, I think it could be a good time for the market to reset a bit.

Three Reasons I Think a Market Correction Would be Positive

Bottom Line for Investors 

Hopefully by now readers understand that I don’t really want the market to go down, but I know that it has to eventually. If the market only went up, that would not be normal. In fact, an overheated market would start to turn me bearish, as I would suspect that the growing “euphoria” could only signal the next market collapse.

The thing for investors to remember is that market corrections are normal, routine features of bull markets. They simply come with the territory. When the next one arrives – and it could be soon – I’d encourage investors to try and see it as a positive occurrence. In my view, it means the market is behaving normally. And that’s a good thing.

1

Disclosure

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
READ PREVIOUS
The Brexit is Official – Here’s What Investors Need to Know!
READ NEXT
Will Revising Dodd-Frank Send the Markets Soaring?

Explore the Archives

Financial Professionals
February 3rd, 2025
How To Think About Tariffs In 2025
Read more
Financial Professionals
January 27th, 2025
Investors Are Becoming More Bullish–And That Is A Warning Sign
Read more
Financial Professionals
January 20th, 2025
How Will Rising Treasury Yields Affect The Stock Market?
Read more
Financial Professionals
January 13th, 2025
The Strong Dollar’s Impact On Markets And Economy In 2025
Read more
Financial Professionals
January 6th, 2025
Is The Fed Steering The U.S. Economy And Stock Market?
Read more
Financial Professionals
December 30th, 2024
4 Key Factors Investors Should Watch In 2025
Read more

Subscribe to Mitch on the
Markets and never miss a post.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional