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Notes From the Fieldby Martin Weil

October 17, 2014

BOO! – market corrections are scary

If I were a “talking head” on CNBC or in the financial press, I would be totally puffed up right about now as to how, for at least the last six months, I have been writing that we were due for a market correction in the Fall.  But self-promotion is not my style and an awful lot of people had that figured out anyway.  Everybody gets something right now and then, even me.  I don’t expect this lucky streak to continue.
 
My outlook a few months back was pretty simple: If bad things are going to happen, they often occur in September-October. The US market had gone too long a time without the slightest hint of fatigue. Well,we have it now. Investors should note that investment-grade bonds have put on one hell of a rally, against all expectations to the contrary.  This provides some counterweight to those with diversified portfolios. 
 
I have had only a call or two from clients during the recent market sell-off, less than I would have expected given the suddenness and severity of the stock market decline.  The important question of course is what happens next.  A market “correction” can be a 10% decline – we are spitting distance to that – or as much as 20%, another 200 points down on the S&P before we leave “correction” territory and enter a “bear market.”  Here, I am afraid my crystal ball is out of service.  Weather forecasters have it hands down on market forecasters when predicting tomorrow’s or next week’s conditions.
As for my guess, I will stick to my thesis that this is the correction I have been expecting and that buying opportunities are presenting themselves for those who might be under-invested. If the market takes another 10% dive, I would be buying aggressively.  But as I said, that is just my guess.  And I may have already had my one bulls-eye for the year.

 

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