Today was another lousy day for the Dow stocks (except for Johnson and Johnson (JNJ), the only winner). In one article there was an interesting comment:
“Yes, the market would probably move dramatically higher if they made a cut,” said Linda Duessel, market strategist at Federated Investors in Pittsburgh. “But I think it's more prudent to allow this correction to continue to unfold. After all, we're in the month of August and coming into September — historically, the weakest months of the year. The market has been in need of a correction.”
The market needs a correction? That's not true at all. The market needs nothing. The market is always right.
Some analysts might need the market to go down in order them to be right. Some others might need the market to recover so that they can sell their portfolio and ride off happily into the sunset. That's different.
Comments like these are probably designed to avoid harsh issues like “too many people are buying stocks that really can't go much higher under most kinds of analysis,” or “individual investors are doing what financial institutions and gurus are telling them to do without thinking too carefully about what they're doing.” It's a lot more palatable to ascribe a cautious persona to the market, saying that it “needed a correction,” than to assess blame on the investors caught in the dive.
In any case, the market doesn't care. It won't care regardless of whether there is a lot of liquidity pumped into it, but it may bend a little for a while. But that just means it will bend more later. And it still won't care.
If the market doesn't care, then we have to. Let's all care about our investments.
In the long run, the market tends to be right. In the short run, it tends to be wrong. Of course, using right and wrong in this fashion, one must remember that it's market-moral relativism: there are many different ways to value the market when deciding whether it is right or wrong at any point in time. I have paraphrased Graham here, I believe. (re: the stock market, in the short turn, it's a voting machine; in the long run, it's a weighing machine)