Corrections: The Next One Should Be Nasty, But May Not Be Tomorrow

Personally, Ive always felt that stock markets corrections are like sudden death: you know it’s coming, just not the timing or the form it will take.

What will the next stock market correction look like ?

Wider Credit Spreads would help – high yield spreads are near 2007 tights.

Higher interest rates would help – even with the Fed pushing short rates higher, the yield curve needs to steepen.

The largest corrections are usually from some outside force, some “exogenous shock” and those are the hardest to predict. It could be anything from North Korea to potential impeachment action, to a disruption in Europe like Greece or Catalonia.

Who knows ? And more importantly does it really matter ?

Bespoke (as always) had some interesting stats this week and last week: 

  • It has now been 3,132 days since the last 20% decline (8.5 years – Is that for real ? )
  • It has been 602 days since last 10% decline
  • It has been 465 days since last 5% decline
  • It has been 335 days since last 3% decline

Source: Bespoke Report 10/6/17

  • So far in ’17 per Bespoke from this weekend’s research, the DJIA daily move has been just 0.305% the smallest since 1964.

But here is the flip side: (from Ryan Detrick’s Twitter feed this past week)

When the has a 6 month win streak (or more) heading into Q4? Strong returns are normal.

  • ’35- +16%
  • ’58- +10%
  • ’80- +8%
  • ’09- +5% ‘
  • 17- ?

The 1982 – 1999 bull market in the SP 500 has just one negative year, and that was 1990.

Sure as you’re reading this, a decent correction will happen.

Thanks for reading.




2 Responses to “Corrections: The Next One Should Be Nasty, But May Not Be Tomorrow”

  1. Mark Russell

    Reading this article from Oct. 2017 “A decent correction will happen”. I think this is where we are and believe the Bull has strong legs heading into Q4.


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