Yahoo Finance has a front page attention-grabbing article this morning calling for a 20% market correction. The reason? A technical analyst’s opinion that the stock market is tracing a formation similar to the April-May 2011 top.
What’s the point? We have said many times, market corrections are inevitable, normal and, in many cases, healthy. Should we worry about corrections? As financial planners, we need to understand and be aware of “the market”, but we believe fundamentals are the ultimate driver of stock prices and fundamentals remain generally positive. Furthermore, we advocate diversification as a critical component in wealth management. Diversification helps to reduce portfolio volatility and provide downside protection during market corrections.