How rare is a year without corrections of more than 3%? 1995 was the last period of incredibly persistent optimism without a hiccup in price to afford a paltry decline beyond 3%. Most consider a pullback of 5 to 10% to be modest and a normal expectation at least once a year. A 3% drop is hardly more than a blink of an eye in a bull market. For the past 12 months, we have not teased the bare minimum 5% drop in the stock market to give investors a chance to climb aboard this runaway train powered by earnings and increasing economic optimism.
No correction for 12 straight months is impressive, but in 1995 stocks ran higher for 15 months without exceeding a 3% correction before scaring traders with a 3-week plunge of over 11% intraday. A similar replay of 1995 would keep the buying frenzy going until about January 2018 before a ‘real’ correction begins.
This post was published at FinancialSense on 10/24/2017.