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Eventually it had to happen.

For the first time in sixteen months, U.S. stocks actually had a down month, and here at Good Life we can only say it’s about stinking time.

February splashed cold water in the faces of those who forgot what a normal stock market acts like. A couple of 1,000 point drops in the Dow Jones industrial average has a way of doing that.

But never fear, by the end of the month stocks had grabbed a dry towel and wiped their faces, regaining a large portion of earlier losses.

We couldn’t be more thrilled that volatility has finally reared its head, and some healthy fear and doubt is finding its way back into market conversation. We can work with fear and doubt. Markets rise with fear and doubt.

Although we believe we are still in a long-term bull market, we would urge caution in the shorter term. When a stock market has a mini-crash like the one we just witnessed, stocks typically return to the scene of the crash one more time before moving on.

So to cut to the chase, we believe the U.S. stock market will eventually head once more to all-time highs before the year is out, but in the interim we need to see more evidence this downturn is clearly over before placing many bets. An S&P 500 that can stay above its February 9th crash site low of 2,533 over the next couple of weeks could eventually be buyable. But a break below 2,533 will probably signal we’re in for a new mini-crash and another month or two of pain. And until we know for sure, we’ll be fine to keep healthy levels of skepticism and cash.

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