Stocks neither rise nor fall in a straight line. Instead, when stocks are rising, they are expected to retrace a portion of their prior advance. Conversely, when stocks are falling, they are expected to retrace a portion of their prior decline. Evidence of this phenomenon are found throughout capital markets over time. But this natural force has been largely missing from the stock market over the past several years. Knowing that the laws of nature have not been repealed despite the best efforts of global policymakers, what does this imply for stock prices once the need to retrace a portion of their prior advance finally returns?
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