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Bear market coming?

edited May 5 in Other Investing
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

  • Actually, that bear market definition is from the most recent high and for Nasdaq Comp that was 11/22/21. Nasdaq Comp briefly was more than 20% down in mid-March and has been so several times since late-April. On the other hand, DJIA and SP500 peaks were around the start of the new year, so YTD would be fine for reference for them and they are in pullback/correction.

    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
  • edited May 6
    These past few years, it's been difficult to imagine what events could finally drag down an unflinching bull market in equities. Then COVID did.....but only for 6 weeks. It was barely a blip on the radar screen.

    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.
  • Well stated.
  • edited May 6
    Short Term tradings may hovers close to sp500 ~3970 to 4300

    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


  • edited May 6
    Most bonds peaked on 8/1/21 (munis and HY peaked around New Year). Strangely, inv-grade corporates have done the worst and HY the best - that doesn't mean that everyone should just have HY. So, the stock-bond portfolios haven't provided their typical protections (as posters have noted already for allocation/balanced funds). Here are 2 bond charts that may default to 1-yr later.

    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
  • Yes. Be careful out there. Remember the tech bubble in 2000? Global financial crisis in 2007? S&P 500 declined 45-50% over a couple of years and took more years to recover. It happens.

    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.
  • edited May 6
    +1, @DavidF. Equities are deep in Deathcross Land but near the January low, and therefore maybe ripe for a rebound, but how high and for how long? The next months, at least, are primed for bad YOY comps and disappointing earnings and growth, Fed pressure to the economic downside, and supply problems and supply chain damage via pandemic, de-globalization, and war (hot and cold) that may not be anywhere near fixed for months if not years.

    On the plus side, there are a fair number of hedged, multi-asset approaches that are working well in this climate.
  • edited May 6
    It's difficult to predict what will happen.
    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.

  • edited May 6
    After today PRWCX is down 10% YTD. That’s somewhat better than the S&P’s YTD loss of 13.5%. Little consolation, however, for anyone who may have bought the fund believing it only goes up.
  • edited May 7
    YTD, FBALX and VWELX lost as much as (only 20 bps lower than) S&P 500. Over the past one year, both these allocation funds lost 4.5% more than S&P 500. I am sure there are other allocation funds like VLAIX that lost more.

    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?
  • edited May 7
    I'm keeping just a toehold in PRIDX. Down bigly YTD. I've taken chunks out of it, in steps, this year. My own profit, TRP tells me, since I bought it--- is still north of 7%. With the hunk I'm removing from it on Monday, I'll buy PRISX. (Financials.) I would buy some PRWCX, but I'm at my limit with it: it's still more than one-third of my total.
    *Isn't this place supposed to be "Paradise?" Gloomy, wet Spring, so far.
    image
  • PRIDX still closed at Fidelity.
  • @Crash- Your pic is eerily reminiscent of my year of isolated duty as an electronics tech at Tarumpitao Point on Palawan Island in the Philippines. The Coast Guard had chains of very high-powered navigation broadcast stations all over the word at that time (1950s/60s), many located in very isolated and remote areas. (Those stations were made obsolete by satellite GPS technology.)

    Certainly one of the best years of my life.
  • +1. Thanks, Old_Joe. When I saw that pic, I fell in love with it. Right here on Oahu, but one I've not visited. Looks idyllic, eh? New spots keep popping up for me to visit. ..... Question: what's a very popular Filipino whine/wine? ANSWER: "When are ya gonna take me to Palawan?"
  • @Old_Joe, I'm a big fan of the Coast Guard from my days in San Francisco. Semper Paratus.

    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.
  • @WABAC- Thanks so much for your note. I well remember the old Customs Building on Kearny Street- at 18 I first went there to enlist in the Coast Guard; four years later went there to get my FCC license. I loved the LORAN service- after the year at Tarumpitao Point they sent me to another LORAN station up at Point Arena in Mendocino County.

    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.
  • Thank you for sharing your great adventures and beautiful destinations.
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