The market ended January in the red, and with that red ink has come plenty of hand-wringing over fears that the month’s volatility is a preview of what we can expect for 2014. According to the old adage, “as goes January, so goes the year”…and the ‘January barometer’ has been right in 62 of the past 85 years.
But putting that notion aside, the fact is the market needs this. After a pretty smooth run and a 30% gain last year, we are due for a healthy correction (which is considered a decline of at least 10%). On average, the S&P 500 has gone through a correction every 18 months since 1945. And looking at the chart below, its about time to give back a little of last year’s run-up:
Headlines reporting a “new record high” for stocks started to sound like a broken record in 2013. After taking a few good steps forward last year, it’s time for the market to take a decent step back.