The stock market dip that occurred earlier this month had “something good to offer,” according to a recent article in The Wall Street Journal.
The article underscores how, before the sell-off (on Friday the 9th), the market’s P/E ratio was high by historical standards, notwithstanding expectations that strong corporate earnings would continue. The correction, it says, “could alleviate some of those concerns.”
Although the prospect of rising bond yields remains a concern for inflation-fearing investors, the article notes that stocks have also gained “some small amount of ground on government debt,” noting the recent rise in an S&P 500 valuation measure that calculates the premium investors receive for buying stocks rather than “inflation-linked U.S. government bonds.”
“Investors who are waiting to ‘buy the dip’ can often allow corrections to run their course, instead of stepping in immediately, in order to scoop up even bigger bargains,” the article argues, quoting a recent client note from Morgan Stanley that says current valuations are attractive enough for disciplined buyers: “Time to pick stocks.”