A Welcome Market Correction

As you may be aware of, the stock markets have been misbehaving of late. So, what is going on? 

As I predicted in my blog two weeks ago, what we are seeing is a market correction after a few years of record making stock market increases. Not only is a stock market correction normal, but I welcome it as an opportunity to build additional wealth for you with the re-investment of your dividends, monthly contributions and new funds. 

Although this is counter intuitive to many investors, who flee the markets for what they consider to be safer ground, creating losses becomes a self-fulfilling prophecy. My favorite quote from Warren Buffet “whether its stocks or socks everyone loves to buy things on sale” can’t be clearer. 

At this period in time, the following events are contributing to the current volatile conditions and can be summed up in five words. China. Oil. Interest rates. Timing. 

China’s economy is showing signs of slowing down, thus their reliance on commodities is reducing in conjunction with a devaluation of the yuan. Oil continues to drag down the market after years of exceptional growth and has especially been difficult on the Canadian markets this year. The US Federal reserve is hinting at increasing interest rates in September (probably now in December). Markets have had years of excellent returns so it’s about time for a correction. 

Numerically, the TSX is down 5.90% and Dow is down 4.50% year to date. Socks anyone?