By: Dividend Sensei
The perfectly normal, healthy, and expected market pullback is picking up steam, causing many investors to worry a correction or even a new bear market is upon us.
There are many competing analysts out there that would tell you either this is a classic “buy the dip” moment, or the start of “the big one”, an epic market crash that could mirror the epic 50% market decline following the popping of the tech bubble.
For example, supporting the “buy the dip” argument are such cherry-picked facts as
- from 1997 to 2000 the Nasdaq suffered three 17% corrections and the tech bubble didn’t pop
- Friday, September 18th was quarterly options expiration day, and the last two bear markets both bottomed the day after option expiration
On the other hand,
- JPMorgan Asset Management estimates that if we get a double-dip recession (economy is showing signs of weakening again), then stocks could fall 22%, another 145 lower
- Ned Davis Research says its base case scenario is that this is a 15% to 20% correction (so about half over)
- Tech bubble 2.0 valuations mean that stocks COULD fall into a bear market right now, rather than reflate the bubble as occurred between 1997 to 2000
Rather than try to pretend like I know where the market’s headed next, let me simply point out the strongest proof that this current market downturn is totally meaningless, and thus something prudent long-term investors need to ignore if they want to actually accomplish their financial goals.