As of tonight the NASDAQ is down 21.27% YTD. If a bear market is defined as a 20% or greater drop from a recent high, the NASDAQ is likely near or in a bear market. The Dow is only off 9% YTD and the S&P down 13%. No bear there. The Russell 2000 small cap index is 16.66% below its 2021 finish and so would appear to be approaching bear market territory. What makes this near bear feel more like the real thing? It’s likely the fact that bonds are sinking along with stocks and offering no relief as they customarily might.
Comments
Charts from 11/22/21 (may default later to 1 year) https://stockcharts.com/h-perf/ui?s=$SPX&compare=$COMPQ,$INDU,$TRAN,IWM&id=p35491880115
Charts YTD https://stockcharts.com/h-perf/ui?s=$SPX&compare=$COMPQ,$INDU,$TRAN,IWM&id=p69664712116
Today we mix sky high inflation & supply disruptions + Russian conflict + rising interest rates along with Fed Balance Sheet reduction + talks of possible recession, etc. Its certainly not all doom and gloom, just reversion a bit closer to historical norms......temporarily.......until the next series of Fed interventions. Rest assured that the backstop can't be removed for too long. The Fed will always tinker. Raising rates by 50 bp per meeting must be absolutely killing Powell. God forbid he goes to 75. I wonder if he pumps his own gas or buys groceries.
Med term maybe a bloody summer we'll blow below that level...flash housing crash /bubble popping may follow.
Next mid fall - winter hope storm may past slowly... once it's oversold/ inflated economy then maybe a new baby bull market maybe born
Friends have bought inverse sp500 and inverse qqq least medium hold on that for few months....
Very difficult to tell the future
Imho stocks maybe very cheap prices now but they may get cheaper mid summer
Get out your buy lists again and watch carefully
Bonds from 8/1/21 https://stockcharts.com/h-perf/ui?s=BND&compare=VCIT,VMBS,HYG,MUB&id=p30148228080
Bonds YTD https://stockcharts.com/h-perf/ui?s=BND&compare=HYG,MUB,VCIT,VMBS&id=p64706093194
Stock markets may be in the early stages of such decline, maybe not. But risks to the downside seem far greater now than any lost opportunity to the upside. Just my view as I continue to lighten my exposure.
On the plus side, there are a fair number of hedged, multi-asset approaches that are working well in this climate.
Here are some of the well-known risks:
1) High inflation
2) Fed raising rates and implementing QT
3) War in Ukraine
4) COVID-19 lockdowns in China (supply chain impact)
5) New COVID-19 variant emerges and potentially wreaks havoc in the U.S.
It appears that markets will continue to exhibit increased volatility in the short-term.
I don't know what will occur over the longer term.
I'm feeling cautious in the current environment.
However, I did purchase additional shares today for two equity holdings which
were hammered YTD and over the trailing 12 month period.
For those that practice portfolio rebalancing, when one thinks the equity markets are bottoming, the question is, does one flip these moderate allocation funds into S&P 500 or other all stock funds?
*Isn't this place supposed to be "Paradise?" Gloomy, wet Spring, so far.
Certainly one of the best years of my life.
I was never the tech you are. But I got an SSB license on the old test down at the Customs Building when all you had to know was the phonetic alphabet. And I used to fill out the FCC forms for our antennae.
Morse code and LORAN both disappeared while I was there. The old timers grumbled.
My folks had a weekend place at Guerneville, which is roughly halfway between SF and Point Arena. I learned to drive on Highway 1, which in those days was typically a 1 1/2 lane "highway" where you were lucky to have a painted line down the center. Great memories, for sure. My four year Coast Guard stint and my final 20 years with San Francisco Public Safety Radio were the most rewarding years of my employment life.
Semper Paratus.