After a fantastic 2013, the new year is getting off to a slow start. The first few trading days saw the S&P 500 in the red, and, at time of writing, it looks to be five out of the first seven.
I expect 2014 to be a good year for investors, and particularly those investors intrepid enough to invest in Europe and emerging markets, where I see the best values. But I also believe it’s likely that we get at least a mild correction in the first quarter. It’s been nearly 29 months since the last correction of 10% or more, and while this does not necessarily mean we are “due” for a correction (for example, the market enjoyed an 81-month correction-free run in the 1990s), it doesn’t hurt to be prepared.
I should repeat that I do not expect a major crash or bear market in 2014. The news that the market has been dreading for months — that the Fed would begin to taper its “QE infinity” bond-buying program — has already been absorbed, and the other three major sources of investor concern — the ongoing Eurozone malaise, China’s cooling economy, and partisan paralysis in Washington — are all showing signs of improvement.
Nevertheless, a 10% to 15% correction can come always out of the blue. And today, I’m going to offer five ways to prepare yourself … just in case one does.