- early 1995 to mid 1997 - approximately 30 months
- Mid 1998 to mid 1999 - approximately 12 months
- early 2003 - approximately 7 months to date
The only point I make here is that we have had some quite long rallies before and the market (that is people) are maybe a little smarter this time around, learning from past experiences that after long rallies the pain of a severe and protracted correction follows. Investors will be more sensitive to the smallest of signs of a correction and will literally run for cover.
There are analysts still calling for a major serious correction but these experts are less vocal right now. What is their rationale for a correction? There are a number of risk factors such as:
Increasing consumer debt
Consumer confidence damaged by a property bubble detonation
Stretched equity valuations
Faltering Global growth
Rising Interest rates
Lastly there is the Scollon “X” factor – which can be the geo-political-human unknown phenomena that is maybe only the catalyst for correcting a market that has overextended.
A useful question to ask yourself at the moment is, will the stock you are about to buy give you a 10% gain? Then the next most important question is: is there a reasonable possibility the stock might fall 10% before you get that 10%? It is salutary to recall that investors who bought the market in June 2001 and February/March 2002 are still behind today – they are still losing money!
I have covered much of the above over previous articles but the points are worth repeating as in heady times it is not inhuman to feel a little invincible. The markets are such that when more and more pundits feel this way that is when the markets whip us. Opportunities abound but “buyer beware”.
Enjoy the ride.