Ken Fisher: Keep your stiff upper lip

As I write, world stocks are down -5.8% since the 8 September peak. UK stocks are down -7.7% since they peaked 4 September. We aren't far from correction territory - technically a short drop of -10% or worse. We might be there by the time you read this, but these things aren't predictable.

Stocks turn too fast! But even if stocks end up falling -10%, -15% or even -19% before they bounce, getting out today is the wrong move. We're already far enough down that you won't save much - especially after trading costs and taxes - unless you can time the bottom perfectly. An impossible feat.

Corrections begin and end without warning. They can start for any reason or no reason - so far this time, we have no reason. That's partly why it seems so scary - confusion breeds discomfort. Usually, corrections surround some big bad news story, like the Asian financial crisis in 1997, Russian ruble crisis in 1998, bird flu in 2006 and the eurozone in 2011. We don't have one this time.

Regurgitated fears

The risks pundits cite today are the same old regurgitated fears folks had for most of this bull. The eurozone? We've fretted it five-plus years. Today's deflation-doom spiral fears are just a rehash of the old euro collapse dread. Folks cite sluggish eurozone growth, but world stocks rose 37.7% while eurozone GDP fell six straight quarters.

China? Same old hard-landing fears folks had since 2011, unfounded as ever. Japan? Floundering nearly two decades. The IMF's slower global forecast? Folks fretted a weaker world since this bull began. Ebola is a new story but not big enough yet - for every pundit who calls it a global risk, another calls it a biotech stock buying opportunity.

There is no big, bad singular fear today. Maybe we'll get one! But for now, this pullback is in the "no reason" column.

Without a big story to seize, some pundits say this must be a correction simply because we're overdue - 27 months since the last one ended, compared to world stocks' average of 18. But corrections don't run on schedules.

Impossible to time

Markets don't mean revert. World stocks went five years (August 1992 to August 1997) without a correction in the 1990s bull, measured in Sterling. Then we had two - a -13.8% drop from 8/7/1997 to 11/12/1997 and a -17.9% drop from 8/17/1998 to 9/29/1998. The 2000s bull didn't have its first correction until 2006 - a -12.2% drop from 6 April to 13 June.

Currency swings kept a 2007 dip from reaching correction territory in Sterling, but world stocks got there in dollars, falling -10.8% from 19 July through 16 August.

The end of a correction is as impossible to time as the beginning. There is no all-clear. Fears rise the more stocks fall! Markets often bounce before the big story fades. Folks trying to time them miss this. Many still feared euro implosion when 2011's correction ended, but stocks bounced 9.1% in just nine trading days. The Asian crisis lasted into 1998, but stocks bounced in November 1997.

A correction's length and size aren't predictive, either. For Brits, the 1990s bull market's first correction lasted 10 months, October 1991 to August 1992. The 1997 correction lasted three months, 1998’s lasted six weeks. This bull market's three corrections lasted two and a half months (4/14/2010 - 7/2/2010), six weeks (7/7/2011 - 8/19/2011) and two months (3/15/2012 - 5/18/2012). 2010's correction hit -14.3%. 2011's fell -19.2%. 2012's fell just -10.5%. All just random.

If you have idle cash, this is your chance. Pinpointing the bottom is a fool's errand. Riding out corrections is painful but right. Doing so is the price we pay for stocks' superior long-term returns. Try to skip them, and you'll likely sell low and buy high - even the most legendary investors can't time corrections' beginnings and ends repeatedly. Markets are just too irrational in the short term.

Buy stocks like these

Now is the time to tune out the noise and think long term. Remember only two things can stop a bull market: unwarranted euphoria or a huge, unseen negative with the power to knock a few trillion off global commerce. Neither exists today. Between a growing world, rising earnings and a gridlocked US congress that can't rewrite rules, this bull market has too much driving it for the end to come now. Keep that stiff upper lip and buy stocks like these:

I'm keen on big pharma now. France's Sanofi fits. With a developing world crying for health it's a leading vaccine maker. Critics envision boredom with an aging product line and stagnant sales. I see its extremely diverse product base as high-quality growth plus rebounding profits at choice valuations: 13 times 2015 earnings, 2.1 times book value, 3.4 times revenue with a 3.5% dividend yield.

Germany's Siemens is off nearly 18% (measured in Sterling) in 2014. Time to buy. Officially an industrial stock, it's about as close as Europe gets to a big technology outfit, as an electronics and engineering firm cloaked in a wide array of downstream products. It sells at 1.1 times annual sales, 17 times my 2015 earnings estimate, with a 2.4% dividend yield.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.