Stock Correction and Bear Market

The repeated correction of the US stock market, being the second occurrence within 6 months, has attracted a lot of speculation, such as the emergence of the first bear market in 7 years. This seems to be quite different from the one that happened in 2008 when there was a major financial crisis. At present, there is an absence of any sign of financial crisis and the growth of US economy is between 2% and 2.5% yearly, an indication that it’s still in the process of growing.

The present situation may cause a lot of investors to sell their properties out of fear, but the smart investor needs to understand proper market timing, which includes the time to sell and the time to buy. The antidote to making a hasty decision that could lead to future regrets is to ensure long term investments, which are more result-oriented compared to short term ones.

The following are the factors that will determine the trend of the 2016 market:

•          The probability of Chinese growth acceleration
•          The number of increases in the Fed rate
•          The fate of crude oil
•          Acceleration of US economic growth
•          The possibility of increased wages
•          The possibility of a bear market emergence

Investors should relax as bear markets do not exceed 12 months or about 367 days. From past records, they occurred on average once in 3 and half years, resulting in only 12 of these since 1945.

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