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By: Donald A. Steinbrugge, CFA – Founder and CEO, Agecroft Partners

Major corrections of the capital markets are a risk that investors always need to consider. The question is not if, but when will it happen. Investors need to consider: What is the probability of it happening in the near future? How big will the correction be? How long will it last? Am I prepared to ride it out, or is it game over if it happens?

Most investors are used to the capital markets rebounding fairly quickly from a market correction. However, the worst sell-off of the US stock market began in 1929 and resulted in a decline of almost 90% that took 23 years to recover. The Nikkei index hit an all-time high of approximately 39,000 in 1989 and more than 26 years later is still below half its peak.

Has the probability of a major sell-off increased?

We have recently heard some of the top investors in the world give very negative comments on their outlook for the capital markets, including: Jeffrey Gundlach speaking with Business Insider said "The artist Christopher Wool has a word painting: 'Sell the house, sell the car, sell the kids.' That’s exactly how I feel – sell everything. Nothing here looks good." Bill Gross stated on Twitter, "Global yields lowest in 500 years of recorded history. $10 trillion of negative rate bonds. This is a supernova that will explode one day."

Many people believe there is an unsustainable bubble in the fixed income markets. No......................

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