The S&P 500 hit it’s current all-time high on January 3, 2022, reaching 4797. As of last Friday, the index closed @ 3901.36. The quick drop of 18.7% left the index just shy of closing in on the definition of a “bear” market.
A close of 20% from the S&P index high, technically classifies as a bear market. Last Friday, the S&P was on track to close at the bear, then reversed course leaving the index just above the bear.
Over the last 140 years, bear markets have lasted approximately 289 days, falling 37.3%. So, will we hit the true definition of a bear market? If so, how much further will the indexes drop before reversing course?
Over the weekend I read countless articles, some suggesting a stock bounce higher is due, all the way through doom & gloom.
Last week profit results from Walmart and Target suggested the consumer is definitely still spending a lot of money, however the size and number of purchases declined in the most recent quarter.
This week, profit reports will definitely be in focus as investors are looking for a short-term direction. We have a variety of companies reporting including Zoom, Nordstrom, Best Buy, AutoZone, Toll Brothers, DICK’s Sporting Goods and NVIDIA. The interpretation of these company results will certainly impact the weekly direction of stocks.
So, are we closer to a bottom, or closer to the all-time high? Even in the face of the significant “debbie-downer” news in the media, at this point, I believe we are closer to a bottom. I expect a lot of back & forth, that will frustrate many shorter-term investors. At this point, looking 12 months forward, I expect the markets to be higher from here. How much? That’s a tough call because we have several unknowns to work through.
Is there any good news? Well, we’ve been here before. Corrections and bear markets happen repeatedly, often times for different reasons. At the end of every bear market, the stock market has ended up higher. Do you believe in the United States? Do you believe in capitalism? Do you believe that consumers LOVE to spend money? I certainly do!!
I cannot put a time frame on when the current issues will be in the rear-view mirror, however I believe they will be…. Just like every other challenge we have faced.
I recall the “tech-wreck” that occurred between 2000-2002. A very dear client said to me, “the Nasdaq will NEVER again go that high!” Most people agreed and they were all incorrect. We’ve been through 9/11 and then of course, the great recession that started in late 2007, lasting through March of 2009. During those time, attitudes were similar… most believed we were done, game over!
I was in school the last time we had escalated inflation. From my reading, inflation hit 13% in 1979 and then 12% in 1980. Guessing, investors thought “game over” back then, too!! That was not the case back then, and will NOT be the case this time around!!
Let’s all do our best to relax and enjoy the upcoming Memorial Day Weekend!!