Correction strategy

Article Excerpt

The market downturn that began last month looks like a correction, rather than a bear market. It’s a crucial difference. A correction may last three to six months and shave 5% to 15% off the market. A bear market can last for years, and the toll on the market can run much deeper. This downturn has already knocked 6% or so off the Dow and S&P 500. So, though it’s doubtful that prices have already hit bottom, that is a possibility. My best guess is that the correction will run through this fall’s mid-term Congressional election. The market often presents a particularly attractive buying opportunity around the time of the mid-term election, and it may do so this year. In the past few months, we switched a number of our recommendations from “buy” to “hold”. If you focus on well-established, profitable companies as we do here, that’s the best approach to take in a market situation like this. After all, you’ll never sell…

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