We are going to keep this holiday edition short and sweet.
Last week I gave a pretty fair accounting of how unhealthy the stock market was in discussing the rolling correction.
That became pretty much a full blown correction after the 12/18 Fed announcement which I discussed in detail in this subsequent article, Stock Investors: Are You “Fed Up”?
In the long run this is still very much a bull market.
In the short run this is a correction for the broad market as traders adjust to the slower pace of likely rate cuts in the future. To be clear, a correction at this stage of the game is kind of a yawn given how easily profits have rolled in the past 26 months since the bull market began.
Note that this correction doesn’t show up as much in the S&P 500 (SPY) because investors are once again flocking to the Mag 7 stocks as a safe place in the storm. This artificially bolsters the large cap index.
The pain of this correction is more readily seen in the Russell 2000 giving up half the year to date gains in just a few short weeks.
As they say “this too shall pass”.
Meaning this correction makes stocks more attractive and ripe for the next bull leg higher.
When will that next rally be in hand?
Unknown and unknowable.
But when it’s a bull market with little worry of a recession on the horizon, then the answer is “soon enough”.
That logic behooves investors to do their best to ignore recent price action as the bigger the drop...the bigger the bounce when the good times return.
This explains why we will not waste our time talking about the movement of our overall stocks as no part of their decline has anything to do with their fundamentals. They are just being pushed around by market forces.
This includes rate sensitive bets like the homebuilder MHO.
What’s funny about that is how much profits grew and the share price rallied WHILE rates were going higher. So even if rates don’t come down as fast as previously expected, it is still a good environment to own a quality stock like this one.
So again...the bigger the drop...the bigger the subsequent bounce when people remove their heads from their posteriors.
When is that?
Soon enough
In the meantime, I hope you and yours enjoy the holiday season to the fullest.
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SPY shares rose $0.08 (+0.01%) in after-hours trading Monday. Year-to-date, SPY has gained 26.30%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
When Will the Next Bull Rally Begin? StockNews.com
