Home 2022 Commentary: Paul Ebeling on Wall Street and Beyond

Commentary: Paul Ebeling on Wall Street and Beyond

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“Investors focused on Russia/Ukraine issues has shifted, the S&P 500 puts in a healthy correction, reversed and sets up for next Bull leg” — Paul Ebeling

On the Russian incursion into Ukraine: Russian Defense Minister Sergei Shoigu says Russian troops will not occupy Ukraine’s territory and will take every measure to ensure the safety of civilians.

On Crypto

JPMorgan Chase (NYSE:JPM) announced Monday that it will make a “strategic investment” in TRM Labs, a blockchain analysis firm, becoming the latest in a growing number of Wall Street firms expanding their footprint in the cryptocurrency sector. This investment highlights the significance of the growing crypto economy and the importance of building trust and safety in this ecosystem to sustain its growth.

Bitcoin and other cryptocurrencies traded higher Monday, though some analysts are still cautious about geopolitical risks, that caution will soon fade.

On the Correction

In investing, a correction is usually defined as a decline of 8-11% in the price of a security off its most recent peak. Corrections can happen to individual assets, like an individual stock or bond, or to an index measuring a group of assets.

An asset, index, or market may fall into a correction either briefly or for sustained frames: days, weeks, months, or longer. However, the average market correction is short-lived and lasts anywhere between 3-4 months.

Investors, traders, and analysts use charting methods to predict and track corrections. Many factors can trigger a correction. From a large-scale macroeconomic shift to problems in a single company’s management plan, the reasons behind a correction are as varied as the stocks, indexes, or markets they affect.

According to a Y 2018 report from Goldman Sachs, the average correction for the S&P 500 lasted only 4 months and values fell around 12% before recovering.

It is easy to see why an individual or novice investor may worry about a 10% or greater downward adjustment to the value of their portfolio assets during a correction. Many do not see it coming and do not know how long the correction will last. For those who remain in the market for the long term a correction is a Good Health sign on the road to retirement savings. The market always recovers so they should not panic.

Corrections are positive for both the market and for investors.

For the market, corrections can help to readjust and recalibrate asset valuations that may have become unsustainably high.

For investors, corrections can provide both the opportunity to take advantage of discounted asset prices as well as to learn valuable lessons on how rapidly market environments can change.

Market corrections occur relatively often. Between Ys 1980 and 2020, the S&P 500 experienced 18 corrections, 13 remained in Bull markets, which are indicators of economic growth and stability. This is where we are now, do not panic, the Russia-Ukraine incursion is a regional issue only and is currently in settlement negotiations: Tune out the Noise!

On average, the S&P 500 takes about 47 days to recover from geopolitical-driven sell-offs, according to data. Other studies show that equities continued to advance for 6 months after geopolitical-driven sell-offs. And BTC could follow a similar recovery pattern given its rising correlation with the S&P 500.

Have a healthy, prosperous week, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.