What a ride in the equity markets recently: up and down > 1% daily. ‘Correction’ is the term being thrown around.
A couple observations:
- We’ve had a really good run in markets for a long time. One of my favourite charts is the distance below peak, or drawdown profile, of the S&P 500: at a glance, we can notice both how bad 2008 was (S&P was around 55% below peak at one point) and how good recent years have been (staying within 5% of peak). It’s almost like the 1990s again – just steady upward movement. Looking since 1950, though, we see that 1990s, as well as these few years, are the aberration: we should be seeing much more downside volatility in the stock market.
- The sell-off recently finally gives a reasonable entry point for regularly-saving investors. You know, the ones who sock away a few $$ each month as part of a regular savings plan (a good idea, by the way). Articles such as this point to an interesting dichotomy: fundamentals (e.g. steadily growing economy, low expectations for earnings) are disagreeing with technicals in a way which may favour long-term investors. That is, the short-term guys may be dumping shares due to moving averages, while long-term guys can pick up some decent value.