No one knows what the market will do on any time frame. As the Dow nears the meaningless 20,000 target, investors will be tempted to overreact and chase the market.
We have to understand that a significant correction (10-20%) can happen at anytime, even with no rhyme or reason. Major market declines (30%+) almost always occur because of an economic recession, but that’s not a given either.
This means that investors should continue to “stay the course” with their investment plans and not react to these moves. The old adage goes “the public loves stocks when they are expensive, and hate stocks when they are cheap”. Do whatever it takes to not fall into this category!
The S&P 500 has moved about 2% below it’s recent highs as we close out the year. There has been more optimism than at anytime during this 8 year bull market, and that could certainly carry over into 2017. But don’t be surprised to see a slow start to the year.
The S&P 500 has support around 2195, and 2165 would be a 5% correction (most frequent correction size of the bull market). These levels could come into play, if indeed the market decides to take a break to start 2017.
Also January has been a tough month in each of the last three years. SPY returns for January:
No one knows if the pattern will continue or be broken. This is why it’s best to stay away from the prediction department. Especially with your portfolios!