About three-fourths of U.S. gross domestic product is composed of consumer spending. In that regard, my wife Carole never shirks her patriotic duty. She especially loves to go bargain hunting.

Hey, everyone loves a bargain. The same consumer behaviors apply to the stock market. How many times have you watched a stock you covet march steadily higher, waiting for a pullback to buy? If you’re like me and most other investors, that’s happened to you more than a few times, especially during the recent run-up.

That’s why I don’t dread corrections. I embrace them. And as I write this, we could be on the verge of a huge opportunity to buy great stocks at better prices.

In recent weeks, the U.S. stock market has reached all-time highs. While these remarkable rallies have been a cause for celebration, there’s a growing consensus that a period of consolidation or even a market correction might be on the horizon.

Valuations are getting steep, especially amid the technology sector. Although I think comparisons to the dot.com bubble are exaggerated, I also think that a correction of at least 10% is increasingly likely. Sometimes, the stock market rises too far, too fast.

The following chart tells the story of a frothy stock market:

The above chart (covering the past 20 years) depicts the reading of a time-proven valuation tool that I find particularly useful: the Cyclically Adjusted Price to Earnings (CAPE) ratio.

The CAPE ratio (also known as the Shiller P/E) provides a more meaningful context than the standard P/E ratio. The CAPE ratio uses real earnings per share (EPS) over a prolonged period to smooth out fluctuations in corporate profits that occur over different periods of a business cycle.

The CAPE ratio is currently warning us that the stock market is indeed excessively valued. This conclusion is validated by other valuation gauges.

Corrections are a reality that investors must accept. They’re also buying opportunities, if you know where to look. Just because stocks are getting pricey doesn’t mean you should stay away.

Corrections are a part of investing life…

The general definition of a market correction is a decline of more than 10%, but less than 20%. A bear market is usually defined as a decline of 20% or more.

Corrections aren’t uncommon. On average, the market since 1980 has corrected every 1.2 years. These corrections have generally lasted about four months.

Since World War II, there have been 24 stock market corrections and the average correction witnessed the market drop by 14.3%.

The last time we experienced a correction was in February 2022, when the Russian invasion of Ukraine triggered a sell-off across global financial markets.

Despite the optimism currently infusing the market, there are indications that the U.S. labor market could be experiencing a slowdown. Last week, several key data points hinted at potential fatigue in the labor market, with the highlight being the U.S. nonfarm jobs report for February.

Although the headline figure of 275,000 jobs added surpassed expectations, a closer look revealed signs of weakness. Revised figures from the previous month were substantially lower, the unemployment rate edged up to 3.9%, and average hourly earnings saw a moderation from 4.5% year-over-year to 4.3%. While some may view these developments with concern, others see them as signs of a labor market gradually easing from a position of strength.

From the perspective of the Fed, a softening labor market and slower wage growth could serve to alleviate inflationary pressures. The Fed’s own projections from December suggest that the unemployment rate may rise to 4.1% in 2024.

The Fed appears poised to initiate a rate-cutting cycle later this year, potentially commencing around the June meeting. But not so fast. The latest inflation numbers are defying the bullish narrative about monetary policy.

Troublesome news on the inflation front arrived Tuesday, with release of the latest consumer price index (CPI), for the month of February. The U.S. Bureau of Labor Statistics reported that overall prices rose 3.2% from a year earlier, up from 3.1% in January and versus consensus expectations of 3.1%. On a monthly basis, costs increased 0.4% following a 0.3% gain the previous month.

“Core” CPI, which excludes volatile food and energy items and which is more closely scrutinized by the Fed, increased 0.4% after a similar rise in January. That lowered the annual core increase from 3.9% to 3.8%.

The upshot: Progress on inflation has stalled. Since hitting a 40-year high of 9.1% in June 2022, inflation has dramatically waned. But certain segments of inflation have remained “stickier” than hoped.

Key contributors to the monthly CPI increase were gasoline and shelter. Food prices were unchanged for the month.

The latest CPI numbers certainly don’t motivate the Fed to cut rates before June, and if we keep getting hotter-than-expected inflation data, all bets might be off for June as well.

That said, the markets shrugged off the CPI report and continued to count on rate cuts by mid-summer. The main U.S. stock market indices closed mostly higher on Tuesday as follows:

• DJIA: +0.61%
• S&P 500: +1.12%
• NASDAQ: +1.54%
• Russell 2000: -0.02%

However, the benchmark 10-year U.S. Treasury yield spiked 1.24% to close at 4.15%, a sign that inflation and rate fears haven’t disappeared.

Read This Story: Crypto Bulls Unleashed: SEC Approval of Bitcoin ETFs Sparks Frenzy

Editor’s Note: It’s clear that every portfolio should have exposure to cryptocurrency. As crypto forges head, we’ll see buying opportunities in this red-hot sector, too.

However, you need to be informed, to make the right choices at the right time. Make the right move and you could reap huge gains in a short amount of time. Make the wrong move, and you could lose your shirt.

The good news is, in our coverage of the crypto market, we separate fact from myth, the wheat from the chaff. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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