A normal market correction is underway

Following six straight months of gains, we finally have entered into a significant market pullback. As you may recall, we expected something like this in September or October, since that is when the market often behaves badly.

Dock Street’s record is perfect when it comes to corrections: every time the market falls more than 5%, Dock Street portfolios do the same. The good news (so far) is that following these dips in stock prices, investors buy back our stocks first. 

Still, there has been plenty to worry about lately: the longest government shutdown in history, lots of chatter about an AI bubble, and, as always, there’s Trump.

The shutdown is probably the biggest issue for most investors, because so many economic indicators have gone missing since August. No retail sales reports, no jobs reports, and no unemployment claims. All this data looked positive in the summer, and we think once the reports resume they will show that the economy is going well. But it’s a long way until December, when the next set of reports will be produced.

Happily, the Federal Reserve Bank of Atlanta is projecting 4% growth for the current quarter, way higher than the 2% or 3% we’ve seen in the last few years. Atlanta’s GDP-Now reports have been very reliable for many years.

So this correction is well within the normal range of a 10% loss. It’s hard to find a year when this type of pullback doesn’t show up. 

We believe the odds favor a third straight year of solid gains for stocks. But keep your seatbelt fastened in case of some more “rough air”.

Best regards,

Daniel A. Ogden