The Flinchum File

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Asking the Unknowable


For well over a year, I’ve been writing that stock market corrections of 10% or more are perfectly normal in the short run and even healthy for the stock market in the long run.  I’ve also written that the longer we go between 10% corrections, the more likely it will be a 15% correction, and we are almost two years overdue for a correction.

I expect this correction still has legs to run.  (The S&P is down 8% at this point.  Small cap stocks are already down 11.6%)  This is a fairly normal correction, reflecting slowing global growth, not a global financial crisis.  The sky is NOT falling.  Buying opportunities are coming up!

Still, this correction is more interesting than a plain vanilla correction, because nobody knows the emotional impact of Ebola on investors.  Instead of a normal 10-15% correction, does the fear of Ebola guarantee the correction will be 15-20%.  Nobody knows, but it happened at a very unfortunate time, compounding a normal correction.

Since you don’t have a choice, just enjoy the ride down, secure in the knowledge there will be a ride back up.

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