Is the U.S. stock market poised for a correction? Is January’s decline of 4% the start of a bigger correction?
These are perfectly understandable questions. In fact, we hear them repeatedly when meeting with our clients here at Newport Private Wealth. And they are being heavily debated within our Investment Committee and by investment experts whose opinions we value. After all, the S&P 500 has increased by almost 50% in the last two years including 30% in 2013.
The pessimists are arguing that:
- the S&P 500 has increased for five consecutive years and a six-year streak has only happened once before (1982-89); and
- market returns after two consecutive years of double digit returns have typically been modest; and
- the stock market is expensive at 16x earnings.
(Source: BMO Nesbitt)