Could This Be the Mother of All Market Corrections?

Could This Be the Mother of All Market Corrections?

“Someone’s sitting in the shade today because someone planted a tree a long time ago.” —Warren Buffett

When the markets are down, I keep meditating on the above quote, and keep telling myself that a mighty tree such as a Giant Redwood, started off as a tiny sapling.

And thus, when it comes to market corrections, it seems we are in the midst of one in September and October of 2021.

One major sign?

Take Google (or Alphabet, Inc.). GOOG plummeted from $2936.41 in the 30 day chart all the way down to a low of $2623.33. Now that’s a significant drop for such a tech giant and ubiquitous corporation.

Buy the way, GOOG’s current price is astronomical, but analysts say this will hit $3000 in the future.

When Did This Market Correction Start?

From my personal estimates, we started experiencing a downtrend at the beginning of September. And I wrote about it here. And observed that the stock market seemed to downtrend in August and September, right around the same time students at all levels are returning to school after their Summer vacations.

It’s a notable observation, since this is the time parents dip into their savings and investments in order to help pay for their children’s college tuition, private schooling and room & board.

But, we have other concerns that have affected the stock market… a continued uncertainty regarding the Covid Pandemic and how it would still affect businesses and jobs.

Add to that the growing concern over inflation and the economy.

And the infrastructure bill that has been hanging in limbo.

And let’s not forget the fact that millions lost their unemployment benefits as of September 4th.

Hunkering Down

Even though one’s investment portfolio might tank during these market corrections, eventually (and based on historical data) the stock market always rebounds to new highs. We experienced all-time highs not too long ago, and thus it was inevitable that the stock market would recede at some point in time.

For long term and value investors, it’s just a matter of waiting it out and showing patience and fortitude during these downtrends. Yes, it looks ugly right now but this is also a good time to buy great companies when they’re lower in price. The only dilemma is when to buy, because the stock market could keep trending lower. So, the onlye sign would be when there is a distinct rebound happening that is obvious.

I keep reminding investors to remember last year around March and April of 2020. Those were some rough times, and we have survived past that.

If you know you are holding on to great companies, then just keep holding on.

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randomguru

Portfolio Manager & Musician

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