The Nasdaq Moves To A Correction; Why That Could Be Good News
“It’s tough to make predictions, especially about the future.” -Yogi Berra
The Nasdaq officially moved into correction territory, down more than 10% from the all-time high. It took only 15 trading days to do this, one of the fastest corrections ever. Interestingly, 2020 holds the two fastest corrections ever. Let’s say it one more time, good riddance 2020.
What does it mean? Well, as Yogi told us, predictions about the future are tough, but this could end up having the bulls smiling. “Yes, being down 10% in three weeks is a scary scenario for investors heavy in Nasdaq and technology names, but history might be on the bulls side here,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, looking at the previous fastest correction ever shows us that six months later the Nasdaq is up 23% on average and higher 9 of the previous 11 times.”
As the chart below displays, previous fast corrections tend to resolve higher (or even much higher) going out 3 to 12-months. This pullback no doubt feels uncomfortable and scary, but investors willing to use this correction as an opportunity very well could be rewarded down the road.
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