After more than 1000 days without a 10% or greater market correction, it looks like we are headed for one. The S+P500(USA) is down 4.28% as of today Oct 2, 2014 from its peak on Sept 17. The TSX (Canada) is down just over 5% from its peak on Sept 2. We are experiencing a lot of volatility due to the Iraq issues, the protest in China and the Ebola crisis.
When markets have such a run up, a correction is expected. Any kind of uncertainty can quickly spur jitters and this is exactly what we are seeing now.
Should you be concerned? No, you should not be concerned. The indicators do not point to a recession. For reasons outlined in my previous market blog, data shows that we are still in the recovery and early expansion phase, not in the recession or downturn phase.
Take a look at the chart below compiled by IA Clarington from data obtained from Morgan Stanley research, Bloomberg and NBER. Most of the U.S. cycle indicators show that we are in the recovery phase with no indicators in the downturn phase.
What should you do? Sit tight and do nothing. This will pass eventually and we should see the recovery continue. Or, you can exploit this volatility and make an investment if you have the funds available and are in your saving years.
Read our last blog here on What if we are wrong.
Terry and I are heading to a 3 day investment conference where we will be listening to many managers, analysts and economists. Stay tuned for a full report when we return.