It has to be kept it mind that this correction is happening after a strong 2019 when S&P was up 30%. However in the same time the 10 year and 30 year US Treasury Bonds have collapsed to 1.25% and 1.8% yield compared to a year ago when 10 year and 30 year US Treasury Bonds has 2% and 3% yield. Given that and low interest rates exist across the world and investors have no where to go for decent return a higher multiple in stocks is understandable.
The worst hit sector has been Travel and Leisure with 30% correction. This includes Cruise, Travel Booking and Airline stocks. The outlook is challenging for these companies near term. Also Banks, Semiconductors, Industrials and Metals/Commodity sectors are in correction territory with 10-14% losses. Oil and major commodities are down which should help most of the economies recover. Healthcare and Consumer Staples and Utility stocks are at close to 7-10% correction.
The all important Tech sector also has had a 10% correction with major names including AAPL, GOOGL, FB, AMZN, MSFT all retracting from 52 week highs.
The near term future is uncertain as there is some chance the Corona Virus could become a pandemic and push some regions and possibly global economy into slower growth or a recession. However I believe the long term fundamentals for strong companies outside travel sector remain good especially if interest rates remain low over next 3-5 years. In a way this correction could turn out to be healthy for the market as it shakes out complacency and resets expectations of investors.
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