Why Include a Portfolio Hedge?

A growing number of experts are drawing parallels between today’s U.S. market and the market in 1929 and 1987. The chart attached illustrates a critique by an author at the market news site ‘Seeking Alpha’. His reason for caution is that there is a significant divergence between the major indexes like the SP500, and the charted average of the fundamental values of the stocks represented on the SP500.

Divergences between correlated markets are significant as they indicate a coming correction, in order to return to the mean. The correction indicated on this chart would require the SP500 to move from 2129. down to 865 !