Intermediate market correction should not deter bullish outlook

We continue to be bullish on the outlook for US equities over the next 12 to 18 months, but also continue to believe an intermediate market correction is increasingly likely. The only question is how severe it will be.

Our guess is that the damage will likely be contained to the -5% to -10% level, and we believe the proper mindset for investors will be to remain constructive through any correction because the risk/reward ratio becomes increasingly favourable as the market declines. Our bullish outlook over the next 12 to 18 months is based on the following reasoning: credit markets continue to normalise with credit spreads back to pre-Lehman levels; every meaningful leading economic indicator is pointing to recovery; the recession appears to be ending or over; real GDP growth should be meaningfully pos...