What if I told you that this correction was small?
The February "flash correction" was 11.8%. This one is barely 11.5%.
What do corrections typically look like from new ATH -- with the economy bustling, wages rising, and a Fed that doesn't want to get behind the inflation curve?
The reason that these corrections go to 15%+ (S&P 2500 min) is because fund and portfolio managers have to re-allocate for the strong possibility of a new chapter in the late-cycle environment, even if their 12-month recession probability has only gone up to 20%. The "forward multiple is only 16X" camp hasn't had to deal with 2019 estimates coming down from $170+ yet.
So, forced selling dominates until a new "fair value" equilibrium is reached. Maybe that's S&P 2400 /$160 = 15X.
What do corrections typically look like from new ATH -- with the economy bustling, wages rising, and a Fed that doesn't want to get behind the inflation curve?
The reason that these corrections go to 15%+ (S&P 2500 min) is because fund and portfolio managers have to re-allocate for the strong possibility of a new chapter in the late-cycle environment, even if their 12-month recession probability has only gone up to 20%. The "forward multiple is only 16X" camp hasn't had to deal with 2019 estimates coming down from $170+ yet.
So, forced selling dominates until a new "fair value" equilibrium is reached. Maybe that's S&P 2400 /$160 = 15X.
כתב ויתור
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