• Print
  • Default text size A
  • Larger text size A
  • Largest text size A

Links provided by Fidelity Brokerage Services

fidelity-fbs-iconThese links are provided by Fidelity Brokerage Services LLC ("FBS") for educational and informational purposes only. FBS is responsible for the information contained in the links. FICS and FBS are seperate but affiliated companies and FICS is not involved in the preparation or selection of these links, nor does it explicitly or implicitly endorse or approve information contained in the links.

Published by Fidelity Interactive Content Services

Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.

The bulls are getting nervous

Stocks haven't had a solid correction since October 2011.

  • By Irwin Kellner,
  • MarketWatch
  • – 01/28/2014
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.

The long-expected decline in the stock market may now be underway.

Monday's drop makes it five days in a row for the venerable Dow Jones Industrial Average (.DJI). The market's tumble from its recent peak is a bit over 4%.

It is true that the Dow's down days are far from a record. So is the percentage drop-off.

However, it comes after a nervous start to the new year, which follows a rather impressive gain in 2013. It also follows a number of warnings many market followers have issued since the end of last September.

That's when investors first started to get really nervous. The main issue at that time was what to make of the Federal Reserve's monetary policy and its guidance for future actions.

Then there was the question of Fed leadership. At that time, Fed Chairman Ben Bernanke's successor was not yet known, and everyone knows that the stock market hates uncertainty.

Speaking of which, the long-running squabble inside the Beltway was another source of angst on the Street of Dreams. However, the market soon adjusted and pressed onward and upward.

By the end of November, however, more edginess appeared.

Small investors started to ask whether it was time to sell. They were becoming aware of the magnitude of last year's gains — not to mention the fact that the Dow more than doubled from its low point in March 2009 at a time when the overall economy grew barely 10%.

Even though the market was becoming increasingly overvalued by most traditional measures, a plethora of buyers kept pushing stocks ever higher until it became obvious that many players were ready to take some money off the table.

Who knew that they would take the table as well?

The main culprits in today's decline are concerns over domestic earnings and a slowing in the economies of several major developing countries, China being the prime example.

As for earnings, so far this season, disappointments seem to be outpacing positive surprises. And the Fed has begun to cut back its easy money policy by reducing its purchases of bonds, thus causing interest rates to rise.

Although cheered by savers and retirees, higher interest rates are anathema to housing, which has already begun to soften. They also make stocks less attractive, especially when combined with slower earnings growth.

Although they've outpaced economic growth for several years, earnings have gone about as far as they can go without help from the economy. And if December's weak employment report is any guide, this help may not be available for a while.

As for fiscal policy, the government's budget deficit continues to shrink, both in absolute terms as well as in relative terms. And we just learned that the debt ceiling will have to be dealt with earlier than expected.

The good news is that, despite the selloff, stocks are still near their record highs.

The bad news is that there has been no correction of at least 10% since October 2011.

After all, stocks need a correction every once in a while to give new money a chance to get on the bandwagon. At least that's what your broker will tell you.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
Copyright © 2014 Dow Jones & Company, Inc. All Rights Reserved.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.
fidelity-fbs-iconThese links are provided by Fidelity Brokerage Services LLC ("FBS") for educational and informational purposes only. FBS is responsible for the information contained in the links. FICS and FBS are seperate but affiliated companies and FICS is not involved in the preparation or selection of these links, nor does it explicitly or implicitly endorse or approve information contained in the links.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.