Stock Market Enters Correction Territory as S&P 500 and Nasdaq Dive
October 27, 2023
In the world of finance, there’s been a lot of buzz surrounding a potential stock market correction. Today, that chatter became reality as the S&P 500 officially entered correction territory, dropping 10% from its July high. This correction marks the first significant decline since the market hit its bottom on October 12, 2022.
Although some investors and analysts are surprised by the lack of attention this correction is receiving, it seems that it is not being viewed as a major concern. However, the decline may not stop here, as experts predict a continuation of the downward trend.
The Kobeissi Letter reported that the market has lost over $4 trillion in market capitalization since July. This staggering figure highlights the magnitude of the correction and its impact on the overall market.
Furthermore, the recent correction has affected not only the S&P 500 but also the Nasdaq, which entered correction territory earlier this week. The correction has brought significant volatility, particularly in technology-heavy sectors as well as oil giants. Companies like Alphabet and Chevron have experienced sharp declines in their stock prices, disappointing investors.
In light of this correction, Jim Bianco, a prominent financial researcher, expressed his surprise at the lack of attention it has garnered. However, The Wall Street Journal did take notice, featuring a headline that read, “S&P 500 Ends Lower, Enters a Correction” on October 27, 2023.
One topic of discussion is whether this correction is just a temporary setback or the beginning of a more prolonged bear market. While a 10% decline is typically considered a correction, some argue that in the context of a bear market, it may be a correction higher. The prevailing trend is downward, leading some to believe that the rally prior to the correction was the actual correction itself. This would imply that the bear market has resumed, and until a new high is set, it would be premature to assume a new bull market has started.
In response to the market correction, Federal Reserve Chair Janet Yellen commented on the higher yields, suggesting they reflect the strength of the economy and IRA success rather than the deficit. However, there are doubts about the strength of the US economy, particularly with rising inflation and increasing deficit spending contributing to an artificial boom.
Meanwhile, while stocks and treasuries are taking a hit, gold and Bitcoin have surged in value. This surge has been consistent for the past few months, indicating a correlation between the two assets.
As the market correction continues to unfold, investors and analysts will closely monitor its impact and whether it represents a temporary setback or a sign of a more prolonged bearish market.