With U.S. and global stock markets continuing to slide this week, the long-awaited market correction may be upon us. With the Japanese market sliding 4% overnight, it now looks like the current pullback may have more to go.
As I wrote in January, the overwhelming optimism for U.S. markets at the start of the year had made me cautious. My favorite sentiment indicators were showing that the market was overbought. And in my mind, a pullback was always a matter of ???when??? rather than ???if.???
That said, it is worth keeping some perspective. With the S&P 500 still only about 5% off its record high, the market has to fall quite a bit before its hits a 10% pullback — the technical definition of a correction. If the current pullback feels bigger, that’s simply because you haven’t really seen one since May 2012.
Of course, Mr. Market’s Moodswings always demand an exhaustive explanation by the media. And with the U.S. economy showing strength and Europe back from the precipice of collapse, today’s doom-and-gloom crowd has shifted its attention to that old standby, emerging markets.
Read more about how you can take advantage of the crowd in regards to emerging market investing at Eagle Daily Investor.