The Market Could Begin Correcting When This 1 Thing Happens
In the short term, the stock market is wildly unpredictable. But when you zoom out, you find it's quite cyclical. The late British banker and fund manager Sir John Templeton described it best: "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."
If you're relatively new to stock investing, this year has probably felt like the sky is falling. But periods like this happen fairly regularly. In fact, the stock market declines approximately:
Those 20% declines almost always occur right after periods of extreme euphoria when greed takes over the market, and investors abandon fundamentals and caution in pursuit of huge gains. There's one data point that is a strong indicator of a euphoric market: margin debt.
Source Fool.com
