Has the Long-Awaited Market Correction Arrived?

Don’t look now, but stocks are actually on track for a down week.
The S&P 500 opened down slightly this morning after falling three out of the first four days this week. As it stands now, the benchmark index has fallen 1.7% since Monday. Is it the beginning of a long overdue market correction?
We’ve been fooled before during this eight-month bull market run. Stocks have gone through numerous mini slumps, only to bounce back even higher after a week or so.

  • December 20-28: The S&P falls 2.8% as the January 1 fiscal cliff deadline looms. Congress agreed to a deal to avert the cliff on New Year’s Eve, and by January 2 stocks were already back up at their highest level since mid-September.
  • February 19-25: Another 2.8% pullback as the March 1 sequestration deadline looms. This time, Congress didn’t come to terms on a deal to avoid the mass spending cuts – and still hasn’t. Nevertheless, the S&P plowed forward to five-year highs by March 5.
  • April 11-18: Stocks fall 3.3% in the aftermath of the Boston Marathon bombings. Wall Street analysts agree: an extended market correction has finally arrived. By month’s end, the S&P was establishing new record highs, and on May 3 it crossed the 1,600 threshold for the first time ever.

Compared to those pullbacks, a 1.5% decline is relatively small potatoes. We’re still approaching 200 days since there was a market decline of 5% or more.
This latest decline, triggered in part by Ben Bernanke’s “tapering” comment earlier this week, again has some investors panicking. One of the lead articles on the Yahoo! Finance site is titled, “Doomsday Investors Betting on Market Crash.”
The doom-and-gloomers have been calling for a market crash for months now. And they’ve been wrong every time.
Are they right this time? Is this an actual market correction? Perhaps. But even after a rare down week, recent history tells us it’s way too early to panic.

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