CFA Institute Charterholders Expect Stock Market Corrections

Julija A. Image
ByJulija A.
June 07, 2021

Stock market corrections are a regular part of investing. However, the results of a new CFA Institute survey published on Tuesday, June 1, relayed charterholder concerns about the quick recovery of their respective markets and expectations of market corrections within 12 to 36 months.

The survey questioned 6,400 CFA Institute members worldwide. 45% of them believe that, due to the stock markets’ speedy recovery, a correction in stock prices may soon follow. The feedback from the questionnaire indicates that financial experts agree that the global stock market has bounced back too quickly after the initial wave of the COVID-19 pandemic. They assume the discrepancy is caused in part by monetary stimulus.

Paul Andrews, the CFA Institute managing director of research, advocacy, and standards, said: “It is interesting to see the survey results telling us that respondents believe that equities have recovered too quickly, as it could show that CFA Institute members believe there is a disconnect between economic growth fundamentals and capital markets caused in part by monetary stimulus, which could be corrected in a not-too-distant future of less than three years.” 

Aside from financial experts, investors voiced their concerns on the topic last month, arguing that S&P 500 has already seen mini-correction in pockets in May, following plunges for big players like Tesla and Amazon, and cryptocurrency crashes across the board.

The survey highlighted more significant concerns about correcting stock prices among charter holders in North America (50% of respondents) than in Europe (40% of respondents). The results clearly reflect the pace of the continents’ respective market recovery since the COVID-19 pandemic had started.

Still, historically speaking, stock market statistics are optimistic and show that minor declines of between 5% to 10% usually take a month’s recovery time and are the easiest to repair. The much rarer full-blown crashes can take up to thirteen years.

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Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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