Stocks enter October in a 2-month correction as traders question the economy's resilience

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A rough two months have tested the market’s uptrend and challenged investors conviction that a soft economic landing was in sight.

As drill sergeants like to say, "Pain is weakness leaving the body" — leaving unspoken the fact that it can also be a sign of something more serious. A fair amount of hurt has been inflicted on markets in recent months, even if it should be well within the tolerance band of a seasoned investor.

Has enough work been done to alleviate valuation risk, with stock prices falling at the same time forward consensus profit forecasts have held up? Depends what eye is beholding the available facts and frameworks. But the raw numbers say the S & P 500 has dropped from 19.7-times the next 12 months' projection to 17.9-times in two months. Not cheap through most any lens. And we can debate what sort of haircut should be needed given higher rates.

 

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