Preparing for a Market Recovery?
The History on Mid-Cycle Corrections
Since 1983, there have been a total of six “mid-cycle” corrections. The emphasis on “mid-cycle” is an important qualifier. It eliminates corrections occurring in the earliest stages of a fragile recovery and corrections occurring with late-stage economic exhaustion.
The most prominent lesson from these six is that they all had very attractive recoveries.
Just how attractive? Once a trough was established, the average twelve month return that followed was +29%.
If that average were to hold true in light of the recent correction, it means looking at an S&P 500® price target of 2,409 by next August 24th.
The Takeaway
In short, the core of the economy is still working quite well. Lending, cap-ex, manufacturing, and retail sales are all growing. Job growth is healthy and wages are increasing. Consumers have the greatest level of buying power seen in a very long while.
As the economy moves forward, bearish investors will have to rectify their positions with growing stock revenues well into 2016.