• Home
  • Stock News
  • Privacy Policy
  • Email Whitelisting
No Result
View All Result
Dividend Stocks Report
No Result
View All Result
Home Stock News

Is a Stock Market Correction Coming? Here’s a Big Red Flag.

by
December 1, 2021
in Stock News
0
0
SHARES
4
VIEWS
Share on FacebookShare on Twitter
Text size

The unknowns of the Omicron variant haven’t been good for stocks. Here, a line at a walk-up vaccination site in Washington, D.C.

Jim Watson/AFP via Getty Images

To say that the Omicron variant is shaking the market would be an understatement. But add that stocks are more expensive than they’ve ever been—and a true correction now wouldn’t surprise anybody. 

Related Posts

Microsoft will let companies create their own custom versions of ChatGPT, source says

Chipotle Mexican Grill misses expectations for earnings, revenue and same-store sales

Ebay plans to lay off 500 employees, about 4% of its workforce

Pro Picks: Watch all of Tuesday’s big stock calls on CNBC

The

S&P 500
has fallen almost 3% from its all-time high hit in late November, just before scientists in South Africa reported the new Covid-19 strain. On Friday, the market had its worst day of the year. Tuesday was more ugliness—producers of vaccines and treatments predicted their remedies probably wouldn’t be as effective against Omicron as other variants. 

But that true correction—a 10% drop—has been elusive, even during all these months of the pandemic. And that itself is a bit astonishing, since corrections are often a normal part of a larger bull market. 

One indicator, though, forecasts a correction—like a dark cloud usually brings rain. The total U.S. equity market capitalization is about 215% of U.S. gross domestic product—the highest level ever, according to Global Financial Data.

Such a high number isn’t good. It’s bad, often a sign that a correction is just around the corner

In 1929, market cap to GDP hit an all-time high of about 100%, just before the famous stock market crash late that year. In 2000, another high at about 150%, just before a bear market—a drop of at least 20%—began. In 2008, a multiyear high, just ahead of the financial crisis. 

The upshot: Maybe a correction; then again, maybe not. It’s all in the hands of investors.

To be sure, stock valuations aren’t known to be the best timing tool for investors deciding if they should do more buying or selling. Valuations can stay high for a long time.

For most of the pandemic era, in fact, the market has been valued at its highest level relative to GDP ever. But high valuations do indicate that when—and if—the economic outlook really does deteriorate, stocks can fall really hard. 

“There is certainly the potential for additional market drops and heightened volatility in coming weeks as a result of this variant, especially given all the uncertainty surrounding it,” wrote Kristina Hooper, chief global market strategist at Invesco. “There is room for a decent correction.” 

What the market needs now is a little hope—that vaccines will be effective against the new variant. Otherwise, get ready for a correction.  

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

Next Post

Stock futures jump ahead of first trading day of December after omicron fears dent markets

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:

By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

Popular Posts

Stock News

Pro Picks: Watch all of Tuesday’s big stock calls on CNBC

by
February 7, 2023
0

Market Movers rounds up the best trade ideas from investors and analysts throughout the day. The pros discussed Activision Blizzard...

Read more

Pro Picks: Watch all of Tuesday’s big stock calls on CNBC

Ebay plans to lay off 500 employees, about 4% of its workforce

Chipotle Mexican Grill misses expectations for earnings, revenue and same-store sales

Microsoft will let companies create their own custom versions of ChatGPT, source says

Dow snaps 3-day losing streak after Fed chief Powell says the peak policy interest rate may be higher

BlackRock Bets Big on These 2 High-Quality and Profitable Stocks

Load More

All rights reserved by www.dividendstocksreport.net

  • Home
  • Stock News
  • Privacy Policy
  • Email Whitelisting
No Result
View All Result
  • Home
  • Stock News
  • Privacy Policy
  • Email Whitelisting

© 2023 JNews - Premium WordPress news & magazine theme by Jegtheme.