Things You See During Every Market Correction

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Rowan Oak
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Things You See During Every Market Correction

Post by Rowan Oak » Thu Nov 08, 2018 1:43 pm

From the peak close in late-September through the week before Halloween, the S&P 500 fell around 10% for a quick little correction. Over the ensuing 10 trading days stocks have now bounced 6%.

Does this mean the correction is now over? Was it simply another flash correction?

I don’t know and neither does anyone else but it is fascinating to watch the change in psychology when we get such a swift downturn in the markets.

This is not scientific in any way, shape or form, but I have some observations on what happens every time we get a market correction.

During market corrections…

…someone will invariably trot out the 1929, 1973-74, 1987, 1999, or 2007 comparisons. Data gets tortured. Graphs are overlaid on top of one another. Scare tactics are employed in the hopes of calling the next crash. And if it doesn’t work the charlatans of the financial world will try again next time...
Things You See During Every Market Correction

Posted November 8, 2018 by Ben Carlson
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

WhiteMaxima
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Re: Things You See During Every Market Correction

Post by WhiteMaxima » Thu Nov 08, 2018 2:17 pm

Irrational exuberance. everyone overly optimistic, market new high, ....

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willthrill81
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Re: Things You See During Every Market Correction

Post by willthrill81 » Thu Nov 08, 2018 2:25 pm

I was slightly surprised to see how many people during both corrections this year have been seemingly wringing their hands about. I really wonder how educated about the volatility of stocks such people are. A 10% correction is literally nothing. They have historically happened with such frequency that it would be a chore to go back and count all of them over a typical investor's time frame. There is often no apparent rhyme or reason for them either (e.g. including the most recent one), which is maddening and frustrating to many.

You must educate yourself regarding the history of the volatility (both stocks and bonds, in real dollars) of an investment before you dive into it. If you don't, you'll find yourself shocked, scared, and stupefied when the inevitable downturns come your way.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Whakamole
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Re: Things You See During Every Market Correction

Post by Whakamole » Thu Nov 08, 2018 3:26 pm

"Buy the dip" is pretty common.

Fallible
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Re: Things You See During Every Market Correction

Post by Fallible » Thu Nov 08, 2018 7:32 pm

This looks a lot like what we see on the forum come market-correction time. Liked this description of investor behavior in bull and bear markets:
investors begin paying more attention to the markets. Have you ever gotten lost in your own thoughts in the car while driving somewhere and once you got there thought to yourself, “I barely remember any of the details involved in driving here?” That’s basically a bull market. Not many people pay attention because they’re relatively boring. Corrections, on the other hand, are more like driving past an accident. Everyone gawks at the cars involved, pays more attention, and slows down, even the drivers on the other side of the road (seriously, why do people do this every time?
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dogagility
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Re: Things You See During Every Market Correction

Post by dogagility » Thu Nov 08, 2018 7:44 pm

What a load of...
Taking "risk" since 1995.

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