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What yesterday's market decline could say about the rest of 2014


Like an unexpected shot across the bow, stocks stumble into the new year and suddenly everyone is getting all Chicken Little on me.

Are you serious?

The Dow (^DJI) peels off 135 of the 3,400 points it has delivered over the past year and people think that something has magically changed.

As steady-handed Hank Smith, the chief investment officer at Haverford, tells my colleague Lauren Lyster today, the day-one dip was normal, necessary, and nothing to be scared of.

“I don’t think it is an omen, but perhaps it is a reminder that markets can still go down,” he says in the attched video. “It was a one way trip up in December.”

Related: S&P's Stovall: Here's why 2014 is going to be a whole lot rockier

And not only December. That almost one percent slip was the single biggest bump we’ve felt in almost two months. What’s even more crazy - or ominous - Smith says, is the fact that we haven’t had a pullback since mid 2012 or a correction since the summer of 2011.

Are we overdue? You betcha. Yet no one knows for sure when or why it’s going to finally happen.

“Pullbacks and corrections are a normal process of bull markets,” Smith says. “They re-introduce a little bit of fear and that’s good (because it) takes away from complacency.”

Even when a meaningful retreat does occur, Smith is hardly about to bail out of stocks saying that ‘’it won’t take away from the fact that we are (still) in a long term bull market.”

In fact, this Pennsylvania-based fund manager is bracing for above average returns this year amidst increased volatility with an unofficial target of 14 to 16 percent gain this year.

Sure that’s a lot less than the 30% haul of 2013, but what’s not to love about Dow 20,000?

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