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Market is Down...Beginning of a Correction?

As we write this, the market is having it's worst day of 2017 so far. Stocks have been due a pull back for some time now, particularly since the election. There is a run to some safe haven assets today, like gold and treasuries and we feel good about our positions there. We've gone since October without the market having greater than a 1% decline.

What may be bringing the most worry to the market is the Thursday vote on the new healthcare package in Congress. The fear out there is that if this doesn't pass, then all the other Trump policies may not be enacted in the future. This fear is a bit misplaced since there is some democratic support for upcoming policies, but zero democratic support for replacing ObamaCare. Regardless, the passing of these policies are some of what has been driving the markets to new highs. What we are seeing today is a bit of unwinding of the "Trump Trades". Earnings season though have been quite good from stalwart positions like Cisco and Oracle and the quarter overall has been positive. The economy is moving along nicely and leading indicators are continuing their improvement. Any talk of a correction could be immediately reversed if Congress does pass the Republican healthcare bill and there is confidence that the House will pass the bill. To be fair, high signs of confidence have meant very little over the last year (Brexit, election, etc...).

Looking at the chart of the S&P, there is short term support around 2300 (around a 4% correction from the peak). Economic numbers and corporate earnings provide an additional backstop, as does improving global GDP. So we might see some profit taking in the short term, but don't see any hard evidence for the market to reverse permanently. Corrections are healthy and the market does not move straight up.

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