How To Appreciate Temporary Pullbacks In A Bull Market

The markets continued their pullback yesterday, reversing early gains, just like the day before.

The headlines noted that February will mark the largest monthly decline since January 2016.

But I should also point out that we just capped off a 10-month long winning streak. So take the 'worst month' headlines in stride given that we just came off a spectacular 10-month long bull run.

So, did anything new happen today to cause the continued pullback? The answer is no.

As I've mentioned before, this is just part of the process of profit taking, and base building.

And don't listen to the false narrative that a rise in interest rates will hurt stocks. This is not true. We will likely see three to four interest rate hikes in 2018. And that's because the Fed sees strong growth and the economy's ability to absorb these rate hikes.

Don't despair at yesterday's pullback. Be glad it happened. This base will likely trace itself out over the next several weeks. That means more up days. And more down days as well. But when the market pulls back, these are the buying opportunities. So learn to appreciate them during this period of consolidation. Because when the market finally does breakout to new highs after this base has been built, you'll be so glad you did.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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