These are nervous times for investors and many investors are wondering if this is the time to run for the hills.
First of all, despite the smooth, upwardly sloping rise the stock market enjoyed from February through September, corrections are really quite frequent and quite normal.
In fact, there have been 23 corrections of greater than 5% since the start of this historic bull market in 2009. We are currently in the 23rd correction.
In each of those previous corrections, the mainstream media cried wolf and many investors — perhaps even you — thought the bear market was about to begin.
Of course, the bear market never arrived and each of those corrections turned out to be a great time to buy, not flee, the stock market.
To show you how silly it is to listen to the talking heads on CNBC, the accompanying chart shows you how many times and when CNBC aired a breathless “Markets in Turmoil” special report.
The most recent one was Thursday, Oct. 11.
I’m not trying to pooh-pooh the stock market’s drop. Nobody likes to see their stocks go down in value, but even more important is to evaluate every correction in the context of the overall economy.
It has been shown time and time again that bear markets are born of economic contraction (recessions), and that in no way describes the booming American economy.
I could cite the uber-strong jobs market, strong consumer confidence, the Trump tax cuts, record stock buybacks and surging corporate profits…
But the one factoid that should convince you more than any other is the double-digit growth of corporate revenues.
The financial engineers running America’s corporations can play a lot of funny games with profit numbers, but one of the numbers that is largely immune from financial prestidigitation is revenues. You can manipulate profits, but you can’t manipulate revenues.
Just take a look at how revenues of the S&P 500 have behaved since 2015:
Without a doubt, American companies are enjoying extremely strong revenue growth and that is the furthest thing from a recessionary warning sign that I can think of.
Hey, I understand: 800-point and 500-point drops in the Dow Jones don’t inspire confidence. But when you look at all the numbers our economy is strong, vibrant and accelerating.
Buy… don’t run.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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