The stock market has been trending higher for a record period, and a correction is long overdue. What can you do to stay in the game, besides reduce your risk? Consider diversifying your assets beyond just a basket of stocks. Here's the rationale."When the equity market tops, what should you expect to happen? We can't know for certain, but we do have a model on which to base our expectations. The Japanese market is on record as having had the longest bubble in history, a span of 288 months between 1965 and 1990 - a total of 24 years. Today, the US secular bull market is not that far behind, with a bubble that began in October 1974 and which continues as of this writing."
"What happened to Japan can give us a good idea of what could happen when the US bubble finally pops. When Japan's bull market ended, the selloff was crushing. Figure 1 denotes what happened when the Nikkei dropped from 38951 in January 1990 to 27251 four months later - a 30% dip. Further, after a one-month rally of 22% and a two-month consolidation, the Nikkei declined another 40% in three months, dropping from 33228 to 19781 in October 1990, reflecting a 49.2% decline in 10 months overall (Figure 2)."
