I Stopped Using My Head, Using My Head
First off, I don’t understand why everyone seems to be waiting for the other shoe to drop while the S&P and Nasdaq continue to clip brand new all-time highs, and U.S. small caps sit just a stone’s throw away from their ATH.
The crazy thing is that it’s not just doomsayers dressed up as financial analysts, like our boy on bubble watch Graham Summers, who are calling for the Big One as if they were Fred Sanford.
Even perma-bullish Wall Street has joined the doom-and-gloom party.
JP Morgan is calling for a 10% correction based on the belief that a combination of inflation rolling over and a future “soft patch” in global growth will stop the S&P 500’s ascent. Bank of America believes there could be a 13-20% downside risk based on the way U.S. yields have traded this year.
I hate to break it to the doomsayers, Wall Street and anyone else anticipating at least a 10% correction in U.S. equities, but neither history nor the current trajectory of the U.S. economy backs your play.
Since 1928, the S&P 500 has only experienced a 10% drawdown in 1% of all months and 7% of all three-month time periods. Suffice to say, it’s rare for the S&P to have a drawdown of that magnitude. In fact, you have a better chance (one in 11) of being called to “Come on Down” on The Price is Right!