Further Correction?

A fuss was made on the network, as Adam would say, about this article by William Rhodes from Citigroup in the Financial Times. I saw or heard two segments with guests refuting Mr. Rhodes argument and opining that the recent dip was the correction.

If you read the article he does not say anything that should be considered shocking. Maybe it mattered to the network because of who he is?

Jack Bogle said that the selloff of late February/early March isn't even a footnote to a footnote to a footnote and I agree. The 6% or whatever the exact number was well within the realm of normal stock market volatility.

Based on some comments left during the dip a lot of folks saw some vulnerabilities in their portfolios exposed, similar to what happened last June.

This invariably causes anguish as people learn that they are not as tolerant of volatility as they thought. I think for some folks the reaction is to gut it out (which may not be a bad thing) with the promise (made to themselves) that they will make changes once things come back a little.

Then when things do snapback they are no longer worried and don't remember what they were feeling as the market was going down so no changes get made and they go through the same emotional experience on the next go around.

If this describes you and you have not made the changes you promised to yourself now is a good time to do so. The market is well off of the March low, you are probably not feeling any angst right now and if the market drops by 5% next week you will wish you had.

This is not a call on market direction but more of a look at human nature. Proper diversification and the right amount of volatility are not easy to create but chances are anyone sitting on this fence has a name or two they know they should sell or cut back on.

Looking ahead to the next quarter I think increased volatility will persist. There are a lot of things the market is worried about and maybe this means a wall of worry for the market to climb. My thoughts have not changed much. I still expect some sort of normal decline/normal bear market to come but I am not going to try to out-trade another 5% dip if that is the worst that comes.

To be crystal clear and to repeat myself; bear markets are normal and will come at some point. This is not a doomsday event it is simply how markets work. Bear market declines of 20-30% are normal and then they go back up. It would be nice to miss a big chunk of the next 20% decline and if you do that is great but if you don't you will not be financially ruined.