The Market Is Due a Correction – Look at These Stats
Economist and Financial Writer John Mauldin wrote this in his weekly newsletter a few weeks ago. It just goes to show you how out of balance the market is right now.
It has been 116 days since we had a 5% correction.
Since 1928, the average number of days before a 5% correction occurred was 50.
We have been 210 days without a 10% correction. Since 1928, the average number of days before a 10% correction occurred was 167.
It has been 1955 days since we suffered a 20% correction. Since 1928, the average number of days before a 20% correction occurred was 635. In secular bull periods the average number of days was 1105. In secular bear periods the average number of days was 486.
The current case of 1955 days without a 20% correction is more than three times the average of 635 days (for the whole period from 1-3-1928 to 12-8-2016).
Corrections (declines of 10 to 20%) are normal for the stock market. My biggest concern about the market right now are those stats. It has been a long time. As a result, investors forget that they are normal. A 10% to 20% decline could feel more like a 30% to 40% decline creating more selling morphing a correction into a bear market.