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Vanguard: Chance of Stock Correction Hits 70 Percent

Vanguard: Chance of Stock Correction Hits 70 Percent
(DreamsTime)

By    |   Monday, 27 November 2017 12:05 PM

Fund giant Vanguard Group reportedly is now warning savvy investors that there is a 70 percent chance of a US stock-market correction.

CNBC cited Vanguard as saying several forces are contributing to the much higher than typical risk, including the narrowing of the bond yield curve and stretched U.S. equity valuations.

“There is always the risk of a correction in stocks, but the Vanguard research shows that the current probability is 30 percent higher than what has been typical over the past six decades,” CNBC cited Vanguard, which manages roughly $5 trillion in assets and is a proponent of long-term investing,  as saying.

"It's about having reasonable expectations," Vanguard's chief economist Joe Davis said.

"Having a 10 percent negative return in the U.S. market in a calendar year has happened 40 percent of the time since 1960. That goes with the territory of being a stock investor."

He added, "It's unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue."

In Vanguard's annual economic and investing outlook published last week, Vanguard told investors to expect no better than 4 percent to 6 percent returns from stocks in the next five years, its least bullish outlook since the post-financial crisis recovery began.

"The risk premium, whether corporate bond spreads or the shape of yield curve, or earnings yields for stocks, have continued to compress," Davis said. "We're starting to see, for first time ... some measures of expected risk premiums compressed below areas where we think it can be associated with fair value."

To be sure, Wall Street indexes hit new intra-day highs on Cyber Monday as an expected surge in online sales boosted Amazon and home improvement retailers climbed after strong home sales data.

Shares in the world's largest online retailer rose as much as 2.3 percent to hit an all-time high of $1,213.41, Reuters reported.

Adobe Analytics has estimated that Cyber Monday would generate $6.6 billion in internet sales, which would make it the largest U.S. online shopping day in history.

Home Depot and Lowe's gained about 1.5 percent after data showed a surprise rise in sales of new U.S. single-family homes in October. Sales rose to their highest level in 10 years, according to the report.

"Investors are looking at retail stocks as Black Friday and Cyber Monday have been a good start to the holiday season, and much stronger data on new home sales has lifted the market higher," said Kim Forrest, research analyst at Fort Pitt Capital Group in Pittsburgh.

(Newsmax wire services contributed to this report).

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Fund giant Vanguard Group reportedly is now warning savvy investors that there is a 70 percent chance of a US stock-market correction.
vanguard, group, chance, stock, market, correction
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2017-05-27
Monday, 27 November 2017 12:05 PM
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