During the week between January 8 and January 15 the stock market fell five sessions in a row, losing over 3 percent in its value. Whether that downturn is the much anticipated correction investors have been alert for, or it’s just a regular speed bump on the highway to more profits, is the question of the hour.
The last time the S&P shed 10 percent or more was over three years ago. Since December 29 that index has dropped by 5 percent up until last Thursday’s closing bell. What to make of these indicators is practically anyone’s guess at the moment. The downturn has made shares less pricey, with the price/earnings ratio of the S&P down to 16 on Friday. At the end of 2014 the P/E figure stood at 20.
American investors are also wary of the fall in commodities, not knowing if that collapse is telling them to buy or sell. Oil prices have also been tumbling, selling at under $50/barrel, a six-year low. The drop in gas prices as sparked a rise in consumer spending, creating a great mood for shoppers expressed in an 11-year high this month.
Other indicators, from the strength of the dollar to the price of copper, have left investors at a loss for interpreting the data. Some seem to believe it is just a bump on the road, and are buying some shares that look like bargains now.
“We’re in buying mode now, and are absolutely pleased to be able to pick up some stocks we’re excited about while investors are putting them on sale,” said Lamar Villere, a portfolio manager at Villere & Co, which has about $3 billion in assets under management.
Ed Keon, portfolio manager at Quantitative Management Associates, agrees with Villere.
“I believe it’s more likely to be noise than part of a broader correction,” said Ed Keon, a portfolio manager at Quantitative Management Associates, a Prudential Financial company, where he helps manage more than $60 billion.