The stock market’s sharp sell-off Monday and rebound Tuesday appear to be part of a “textbook correction,” said the BMO Family Office’s chief investment officer, Carol Schleif.
“While the broader stock market is on the brink of entering correction territory, it's typically wise to let a bit of dust settle before putting new money to work, as there is risk of catching a falling knife during a correction,” Schleif said. “We would characterize the recent market pullback as a textbook correction, after months of low volatility so far in 2024.”
Worries around the July U.S. jobs report and global geopolitical troubles sparked sell-offs as the S&P 500 fell 3% Monday Aug. 5 before Tuesday’s 1.3% rebound.
The underlying economy is “still in solid shape,” and August “historically is a volatile time for markets,” Schleif said, downplaying recession fears in anticipation of the Federal Reserve’s lowering interest rates this year.
“It's important to remember that past recessions were caused by the need to address imbalances in the economy, such as the tech stock bubble in 2000 or real estate in 2008; and right now, there aren't any notable imbalances in our economy,” she said. “While we are seeing a slowdown in some of the economic data points, it's entirely policy-induced, with the Fed keeping rates high for this long. And that policy can and should be reversed rather quickly.”
The Callan Family Office added that “market corrections are normal and common, and the data we are looking at does not suggest a recession is in our imminent future.”