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Plus New Zacks Strong Buys for Friday, February 28
Profit from the Pros By Kevin Matras Executive Vice President
Stocks In Correction Territory, Why Now Could Be A Great Time To Buy
Stocks closed sharply lower yesterday, putting all of the major indexes in correction territory.
What is a correction?
It's a pullback between 10% to just under 20% (19.99%). (A pullback of 20% or more is defined as a bear market.)
Corrections in bull markets are normal and healthy. Granted, it doesn't feel normal or healthy when it's happening. But it's a common occurrence.
Over the last 40 years, there's been 13 corrections prior to this one. The average size is about 14.5%. And the average length is about 3.5 months.
This correction however only took 6 days. And it's currently down 12.03%.
For perspective, this bull market, which is nearly 11 years old (the longest bull market is 12.3 years, so we've still got more to go before this one breaks the record), has already had 5 corrections including this one. Again, a common occurrence.
The only reason why this one feels so scary is because it happened so fast, and it's coinciding with a health scare – the coronavirus.
But quite frankly, they all feel scary. The last one we had was in Q4 of 2018. Remember that one? Everybody was calling for a recession because of the so-called trade war and tariffs. Total nonsense. Yet the correction happened anyway. But so did the epic rally that followed.
Will there be more downside? It's possible.
But the current correction is not that far off from the average.
And a correction is all I think this is.
Because in spite of the coronavirus worries, our economy is in great shape with a strong GDP, unemployment at a 50-year low, household income at a 20-year high, and consumer sentiment near record highs.
Let's also not forget two record trade deals with our top 3 trading partners that are poised to usher in a wave of new growth and prosperity.
And when the worst of this outbreak is finally behind us, stocks are expected to soar as pent-up economic demand is unleashed.
So make sure you take full advantage of this correction.
Executive Vice President, Zacks Investment Research
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Those "in-the-know" expect a major price jump.
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