Profit From An Anticipated Stock Market Correction!
Economic ‘Speed-Bumps’ To Be Encountered!
by Ian Harvey
February 11, 2013
Several factors could cause a pullback in the stock market, as well as buying opportunities.
Slowing growth in Germany, banking scandal in Italy and corruption allegations in Spain appears to be increasing risk.
Market elation has been a little bit too early, moved a little too far, and there are a few speed-bumps that actually may cause markets to stumble, at least in the shorter term. Markets do not like uncertainty, and the longer this continues, the longer the uncertainty is over the markets, the more likely is it will have a pullback.
Also of importance is a statistic noting that the U.S. stock market is approaching 500 days since a 10 percent-plus correction, which is the tenth-longest time in history that such a bull run has occurred.
Also, stock valuations are no longer cheap with respect to the U.S. market -- growth isn't coming through as was originally thought, and there is a level of uncertainty, meaning that it is more likely that the momentum followers – for example, the hedge funds are buying into financials – may begin to stumble.
However, the scenario is not all dire – a buying opportunity in the making!
If there is a correction it could be muted because it'll be a fantastic buying opportunity for those investors that are looking to rotate back into risk assets, because over long-term, many investors are actually more bullish about equities.
Low interest rates, credit spreads at multiyear lows and the prospects of a return to growth could still bode well for equities.
What the market needed was confidence and the return of depositors to put their money into European banks, something that hasn't happened sufficiently.
All-in-all, a correction will give a slight cause for concern -- meaning that the investor is growing more cautious short-term, although, obviously, more bullish longer-term.