First things first: Don’t panic. The raging, grinding bull markets are “officially” in correction territory.

It’s a healthy thing.

Though I’ve been consistently bullish in my outlook over the past year or so, I’ve said that a 3% to 5% dip in the markets might be in order and that a correction like this would be welcome.

Why? It’s not that I enjoy watching stocks fall… unless I’m planning to recommend that my readers play the “rubber band snap” (although, I did, and they made a quick 50% gain).

Rather, this downturn is good for the simple reason that we needed to see that capitulation.

Let me show you what I mean, and why this week’s rough sledding has been a good thing, even in the very short term.

The Market Has Dropped. Round Up the Usual Suspects…

Like I said, markets needed to see a capitulation for the buyers to get wiped out, give up, and clear the way lower for stocks to go.

In that way, we hit a short-term bottom, which clears the way for stocks to go higher.

In this case, I think, much higher.

I’ll tell you why I think that.

It has to do with what’s likely causing the selling, or, more to the point, what isn’t causing the selling.

As my friend, Charles Payne noted on FOX Business Network‘s “Making Money” recently, it seems like every other day since selling started on Feb. 2, we’ve been hearing about a cast of “usual suspects” in the whodunit of plunging markets.

First, we heard it was anxiety over the U.S. Federal Reserve possibly raising interest rates – a return to the old “good news is bad news” market narrative we’ve seen play out over the past three years. The thinking here goes that any positive economic news will spur the Fed to tighten up policy, restricting the flow of the low-cost money that’s propelled stocks since quantitative easing began.

Then suspicion turned to the bond market, which saw yields hit four-year highs briefly, but which, on closer inspection and a few days of quiet, does not seem to be sliding into flaming bear market territory just yet. The fear here is that money will start flowing into other investments, because stocks are no longer the “only game in town.”

Print Friendly, PDF & Email