The FT were out yesterday with one of their “Short View” videos and they are highlighting the “complacency” factor in markets. They cite an analyst at Societe Generale who warns that it’s been a long time since we’ve seen a 10% correction in the US. Going on 469 days it’s the 4th longest run without such a correction since 1970.
In Europe it’s been a different story with the Italian stock market posting a high to low loss of 10% on the falls over the last few days.
It’s an interesting take and I’ve pulled up the chart and measured some of the sizable falls over 5% since 2011.
US S&P corrections
Perhaps most striking is that the bigger corrections are gradually decreasing in size.
What that means going forward can be viewed in two ways.
- The shallower falls are a sign of real strength in the market and the massive rally, which could potentially lead to an even bigger upside blow out
- We could be approaching the point where the market is getting complacent and will have an event that will bring the market to its senses.
All markets need to be refreshed now and again and pull backs and retraces are healthy so going without one for a while could signal alarm bells.
Are we due a big one for the S&P and US stocks in general, and more importantly, when might that happen?
