Robert Frost’s 1916 poem "The Road Not Taken" is one of the most famous and misunderstood works in the English language. It’s not about an intrepid soul forging a unique life through individual will. It’s about the inevitability of our fate. The roads aren’t as different as they seem and the destiny never changes.
Which is more or less how things are shaping up in 2014. All the consternation at the end of last year getting bullish or bearish has proven more or less pointless. The S&P 500 (^GSPC) ended trading on Wednesday within 1% of flat for the year to date.
While not specifically citing Frost, Joe Fahmy of Zor Capital suggests all roads lead to a correction, the only question is whether it comes in the form of a crash or more of this grinding. “The market can do one of two things,” says Fahmy in the attached video, “It can correct through price or correct through time.”
Calling last year “almost too easy” for bulls, Fahmy sees parallels to 2004. “After we had a huge year in 2003 the market didn’t really go anywhere. The S&P never corrected more than 10% and it just digested those gains.”
That’s the best-case scenario. The alternative isn’t an extension of last year’s 30% rally but something more akin to 2010 when stocks went on a brutal ride including a 1,000 point “flash crash” and a 15% slide between April and the beginning of July. The market rallied into the close of 2010 and managed to finish up more than 10%.
Fahmy says there’s a decent chance of a correction into the summer as investors adjust their expectations. “If there is any upside volatility I think it will come in the fourth quarter.”
That’s a nice way of saying things are probably going to get worse before they getting better. The first quarter doesn’t end until Monday. To borrow from another poem, jittery investors better buckle up, we’ve got miles to go before we sleep.