Feb 11, 2018

Zacks on correction concerns: "My advice: ignore it all"

If you look closely at some of the factors and events surrounding this market action, it's fairly clear in my view that is has all of the hallmarks of a classic stock market correction:

• Sudden, scary declines in equity prices
• No material changes to economic fundamentals, which we believe remain very strong globally
• Analysts and pundits reaching for 'causes' of the market correction, with what seems to be no clear answers
• Media abuzz with commentary over whether this could be a major downturn
• Investors shifting focus to day-to-day price fluctuations instead of focusing on long-term objectives 

What's more, if one were to review the "causes" given for the market correction, you would likely find are old, recycled fears and stories that may be too marginal to matter, in my view. So far, we've heard the correction was caused by rising inflation concerns, worries about concurrent rising interest rates and rising stock prices, fears about global central bank tightening, anxiety over the possibility of trade wars, and even the product of an obscure ETF that bets on the inverse of the VIX. The ETF, ticker XIV, fell some 85% and Credit Suisse is reportedly ending trading for it later this month.

We believe that the root cause of the correction could be any one of those events or none of them. Market corrections do not come with playbooks or detailed explanations, and they are very difficult to be timed.

My advice: ignore it all.

~ Mitch Zacks, Zacks Investment Management, February 22, 2018

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