Concerned About a Corrections?

History shows us that equities markets experience a 15% correction every 3-5 years.  In recent years, they are coming closer to the 2-3 year mark.  Each time, the press puts a label on the reason, but I find the reasons aren’t really relevant.  They are a label in an attempt to explain a very cyclical, repeatable system.  Financial markets have a strong tendency over time to revert to the mean.  Ultimately if returns are too robust, a slow or negative cycle ensues to get closer to the “normal averages” for that cycle.  Or if returns are flat or negative for a while, markets tend to experience a positive spurt.  It’s just the way they work.

Our last 13% correction was in early 2016.  In 2015, we had a 12% correction; in 2011, we had 19% correction and in 2010, we had a 16% one.

If you weigh a potential 10% gain on your portfolio might be over the next year against the potential loss in a normal correction versus a 2008-event, then you can make an intelligent choice Discuss this with your advisor so you can work out an approach that works for you – one that eliminates some emotion and leaves room to assess the situation as it unfolds.

 

Any opinions are those of Shari Burnum and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance may not be indicative of future results.