The S&P 500 (SPX) is down 10% from the January high, has broken the 200-day moving average, and finally “whooshed” on a 90% downside price and volume day.  We continue to believe the two-month intermediate-term correction has been driven by human nature rather than a significant change in our positive fundamental thesis.  Why are we so sure this is not a fundamentally driven peak in the market? The reasons for the correction keep changing!

Remember the “shock drop” in early February began with stronger economic data, and a labor inflation reading that was going to drive rates up past 3% in a new secular uptrend.  Now we are retesting that early February low with a 2nd derivative slowing in the global economic data, fear of a trade war, and meaningful drop in the 10-year U.S. Treasury yield. The excuses for the correction changed, which suggests to us it was more about relieving a historic level of stock market and economic optimism in January, than a fundamental change that would warrant a more defensive posture.

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