Analyzing The Market Correction
The Standard & Poor's 500 index fell into correction territory Friday — dropping more than 10% since hitting its all-time high — and closed the week at 2,658.69.
The 60 economists surveyed by The Wall Street Journal in early October predicted GDP would grow in the third quarter by 3.4% and an average quarterly GDP growth rate over the five quarters ahead of 2.7%.
While the precise cause of a market correction is always debatable, earnings expected on the S&P 500 companies in 2019 is likely a factor. Wall Street earnings growth expectations for 2018 and 2019 of 22% and 11%, respectively, are well ahead of the S&P 500's historical trend rate of growth. This accounted for the market's strength in recent months, as the long bull run recently became the longest-ever bull market in post-War America.
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