A market correction is defined as a decrease of at least 10% in the prices of financial assets, such as stocks or stock indices, from their recent highs. These corrections are natural and frequent events in financial markets, allowing for the adjustment of inflated valuations and offering opportunities to reevaluate investment strategies.
Current Market Situation (December 19, 2024):
Ibex 35: The main Spanish stock index has experienced a drop of 5.6% from its recent highs, falling below 11,500 points. This correction is attributed, in part, to the negative reaction of the markets to the U.S. Federal Reserve's decision to keep interest rates unchanged in the short term.
Investment Strategies: Firms like Beka Finance have decided to significantly reduce their exposure to equities heading into 2025, anticipating a possible recession in the U.S. and increasing their investment in alternative assets and fixed income.
Considerations for Investors:
1. Stay Calm: Corrections are normal phenomena in financial markets. Historically, most corrections do not lead to prolonged bear markets. It is essential to avoid impulsive decisions based on fear.
2. Evaluate the Portfolio: A correction offers the opportunity to review and, if necessary, rebalance the investment portfolio to ensure it aligns with long-term financial goals.
3. Buying Opportunities: During corrections, the stock prices of solid companies may decline, presenting opportunities to acquire assets at more attractive values. However, it is essential to conduct careful analysis before increasing positions.
4. Diversification: Maintaining a diversified portfolio can mitigate the impact of corrections, as different asset classes and sectors react differently to market fluctuations.
Conclusion:
Deciding between buying more assets ('buy') or holding current positions ('hold') during a correction depends on individual financial circumstances, investment goals, and risk tolerance. It is advisable to consult with a financial advisor before making significant decisions in response to market fluctuations.
For an additional perspective, you can watch the following video where experts discuss strategies during market corrections:
