I personally start to pay attention when the market drops below its 200-day moving average. For the S&P 500, that would be around 2,068, which equates to a drop of just under 6 percent from the all-time high. This kind of a dip would be absolutely normal volatility—and something that, again, we’ve already seen twice this year. However similar the charts look, what we are seeing now is pretty normal, not a signpost of doom.
If we do get a repeat of 1987, that would be scary and damaging. On the other hand, it would also likely be short lived and a buying opportunity—or, in other words, a pullback. Right now, economic conditions are such that any drop is very likely to be just that rather than something worse.
Let’s not confuse a pullback, even a very big one, with another 2008.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.