US equity markets continue to march upward, fueling fears of a correction. History suggests that a downturn is overdue. So how should investors prepare?
Corrections are common in equity markets. Since 1928, the S&P 500 Index has suffered a 10% downturn every 33 weeks on average. Yet today it’s been more than 70 weeks since the last 10% correction and more than a year since the market fell by 5% from peak to trough.
It’s almost impossible to time market turning points—but you can position for volatility. Scrutinize your equity allocations and avoid exposure to the most expensive parts of the market, which might get hit hardest in a correction. Consider strategies that can cushion the blow from a pullback while tapping into sources of strong returns for a long-term recovery. Staying invested in the right mix of strategies through a downturn can help investors enjoy better results over a full market cycle.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.