AFMC - Market Corrections Matter More Than You Think
2024-04-02 11:20:00 ET
Summary
- Over the next few months, the markets can extend the current deviations from the long-term mean even further.
- There is a massive difference between average and actual returns on invested capital.
- During excessively high valuations, investors should consider opting for more “active” strategies with a goal of capital preservation.
During running bull markets, much commentary is written on why this time is different and why investors should not worry about market corrections. One such piece was written recently by Fisher Investments. To wit:
Market Corrections Matter More Than You Think"After the S&P 500's 26% return last year and this year's strong start, many investors are worried - understandably - that this bull run is getting ahead of itself.
They shouldn't. The strange-but-true fact is that, statistically speaking, average returns - which have amounted to about 10% a year over nearly a century of trading - aren't normal in the stock market for any given year. A second, surprisingly pleasant fact is that so-called "extreme" returns are far closer to what we'd call normal - and they're mostly on the positive side."