What's happening in today's stock markets? Is it a correction or a recession? The dictionary defines a correction as "a change that rectifies an error or inaccuracy". But is this an error or pure market design?
In investment markets, a correction represents about 10% decline from a recent high. We start to talk bear market territory when we reach 20% decline – somewhere we’re not.
Much as a correction may sound scarier than it looks, remember that corrections are a normal part of stock market trading. For instance, the S&P 500 has had about 5 corrections between 1990 and 2000 and 4 between 2010 and 2017. Yet the same index was about 339 points in 1990 and about 2275 points in 2017^. Historically, corrections are followed by spikes in the markets leading to other highs, then another correction follows and so on…
The last thing you want to do is to panic and hit the sell button. Remember, market corrections offer opportunities in the market place to re-evaluate your positions and take advantage of dollar cost averaging. It may be an opportunity to check in with your strategies and confirm with your advisers before making any moves. Remember that markets will go up and down in the course of your investment strategy. Sticking to the strategy matters most.
General Advice Disclaimer
Note: - this article is of a general nature only and does not take into account your objectives, financial situation or needs. Please consult a qualified Financial Adviser, like Wealth Peak Financial Advice, before making any decisions on the basis of this article. Wealth Peak Financial Advice Ltd ABN: 24 615 007 326, is a Corporate Authorised Representative of Total Financial Solutions Ltd. AFSL 224954 and ABN 94 003 771 579