"The number of 1% down days for the S&P 500 in any given year has averaged 27 since 1969; the S&P 500 has seen just sixteen 1% down days over the last 12 months. It has now been 468 days since a market correction of 10% or more, the fourth longest period on record, and, as we show below, the annualized peak to trough loss has only been 5% compared to typical annual drawdown of 15%."So the S&P 500 has just under 60% of the number of moderate correction days as normal, the time from a moderately big correction is the fourth longest on record, and we're supposed to believe everything is peachy? It could well be within the bounds of normal variations, but I don't know all the factors present in those previous years; was the Fed as heavily involved as they are now, for example. Just before the start of the year I posted this chart:
Dow 6000? There would be blood in the streets. Even if that doesn't happen, we're overdue for a correction of 20% or more. As Bill Bonner says,
Because, as anyone who understands the phenomenon of mean reversion will tell you, the longer something remains an outlier, the more likely it is to revert back to the average.Just when that shoe drops is the big question.
In this case, it means the longer US stocks go without a meaningful correction, the more statistically likely a meaningful correction becomes.