In This Issue:
The Way Ahead
Long-Term Investors Welcome Stock Corrections
Mutual Funds May Beat Index Funds From Here On
Finding Current Income
The Bottom Line
Our special report last month that warned about a stock market correction, proved to be very timely. We would have actually been happier, not to mention a bit wealthier, to have been wrong. Unfortunately, Mother Market never consults us before making her moves.
In any event, from April 29 to May 26, the Dow and the Nasdaq dropped an uncomfortable -10.7% and -12.6% respectively. Judging from the strength of the decline, it has further to go before it runs out of steam.
The Way Ahead
The biggest question for investors now is whether the decline is a normal correction, or the start of a bear market.
We think the drop is most likely a correction. It was to be expected following the heady run-up of the previous 12 months. The only surprise is the retreat didn't come earlier. The delay allowed many stock prices to move further ahead of the economy, which means they have more ground to give back before the scales are balanced again.
Fortunately, the economy is continuing to grow – and it is doing so at a higher pace than most analysts predicted. By the fall, we think the stock market will resume its advance in a classic catch-up move.
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