Wall Street officially in 'correction area'
Wall Street officially in 'correction area'
There is another turbulent week behind us. This week was again dominated by the bears who managed to create even more damage. The Dow Jones index had to deal with a decrease of more than 4% on a daily basis. Officially we are currently in 'correction area'. Is that bad?
It is clear that the year 2018 will not be a repeat of the year 2017. During the past year we were dealing with extremely low mobility, while the market is now dominated by extreme mobility. For traders this is a big boost, because they usually benefit from the necessary price fluctuations.
Falling share prices also give opportunities
- LPL Research has investigated the effect of a correction. since the year 1980 we have already experienced 36 corrections to the S & P 500 index and the average correction is 15.6%. On the contrary of what many investors think, a correction offers enormous opportunities.
The above table from LPL Research shows that the S & P 500 index scores 16% higher on average a year later after the lowest price has been reached. Two years later, that increase is even 28% on average.
Of course this is no guarantee that the stock markets will be higher in a year, but this research makes it clear that the fear should not prevail. The moment that investors start to act on emotion, this rarely means good news.