The Australian share market is historically due for a correction, according to one expert.
Fairmont Equities managing director Michael Gable noted that we just saw the 2021 financial year close with the All Ordinaries Index (ASX: XAO) heading up 26%.
"Its best performance in 34 years — as you would know, the share market is unlikely to repeat this performance," he said in a memo to clients.
"If the easy money has been made off the COVID lows, then what can we expect from here?"
Unfortunately history is not on investors' side.
"We… tend to have a correction every 18 to 24 months, and it has been 16 months since the last one," said Gable.
"Many are betting that the market has run too hard in the face of increasing inflationary expectations, the re-emergence of COVID cases, and a sluggish vaccination rollout."
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How to dodge the 2021 share market correction
Despite the pessimism, Gable reckoned the share market would still end up positive for the 2022 financial year. But it will require hard work on the part of individual investors.
"Gains will be harder to come by," he said.
"Last year we had a 'rising tide lifts all boats' scenario that made it seem so easy that every second millennial is now an expert trader. I suspect that reality will hit home this year, don't you?"
To clinch the gains on offer, Gable recommended investors be very alert and not be passive about which ASX shares to buy and sell.
"It will involve more than just buying and holding," he said.
"Those of you that have been around a while know that buying and holding doesn't always work and I am sure you can think of more than one stock that should have been sold a lot earlier."
Finance commentator Peter Switzer also said this week that even if a short-term correction does occur, it won't be anything like the bloodbath seen in March 2020.
"There's a lot more certainty about what will happen compared to the frightening days when the virus threat closed down the world economy, Italians were dying and hospitals weren't able to handle the avalanche of patients," he wrote on his website.
"There's a pile of stimulus from governments worldwide. Interest rates are set to make consumers spend and businesses invest."
He added that Australia now has coronavirus vaccines.
"This scare will escalate the jabbing between now and Christmas," Switzer said.
"We learnt yesterday [more] Pfizer is on the way and that will be a huge stimulation for vaccinations… This is the kind of game-changing development that will suppress excessive negativity of big stock market influencers."
