With the correction in the S&P500 now confirmed (>10%), many are asking, what happens next? Is this the start of the long-awaited bear market? Given that there does not seem to be a significant enough catalyst for this as of yet (although some are pointing to interest rate hikes and so on), I prefer the assertion that the current equity market correction is a reversion to the the wider macro uptrend. This aligns with fundamental valuations somewhat, in that key valuation ratios such as PE, PEMAX, and, in particular, Shiller's CAPE ratio, have all reached high levels comparative to key periods throughout history. A correction in this sense is required, or even healthy. In viewing history, we can see that a key predictor of the final phase of a bull market is the hype and FOMO that causes sideline observers to jump in to the fray en masse, chasing momentum with no recognition of valuation. This does not appear to have occurred as of yet, and so for now I retain my assertion that the recent market activity will remain a correction, rather than a sustained bear market.
I do not pretend to predict what will happen next, and am watching closely like all other market participants for material (and fundamental) changes in the landscape.
This was a very well thought out presentation, I have been investing in stocks for 40 years and options for 20. I still can't predict the market, I like to say I cracked my crystal ball in the Dot.Com crash and totally destroyed it in the Housing Market. Learning something new every day, have a great night
John
John