All METARs are probably aware that today was a bad day in the markets. The S&P 500 is down 22% from its January 3, 2022 peak, officially in bear territory. Many METARs are heavily invested in stocks and intend to hold, confident that the market will bounce back as it has in the past.
https://www.nytimes.com/2022/06/13/business/bear-market-time…
**What Happens When Stock Markets Become Bears**
**Steep downturns of stocks by 20 percent or more are relatively rare, but how long they last could portend damage — for you and the economy.**
**By William P. Davis, Karl Russell and Stephen Gandel, The New York Times, June 13, 2022**
**...**
**Bear markets — when stocks decline at least 20 percent from their recent peaks — are relatively rare, and they frequently precede a recession. ...**
**Not everyone believes a recession is imminent this time, in part because there are areas of the economy that are doing better than in previous bear market moments. Unemployment is near a half-century low, and the economy has regained all but 800,000 of the 22 million jobs lost at the height of coronavirus-related lockdowns. While rising mortgage rates have begun to dampen activity, housing — generally one of the biggest sources of wealth for Americans — remains strong.** [That was also true in early 2007. – W] ...
Many people have gotten to used the stock market going up. That’s not a guarantee — especially in the near term.... [end quote]
This article has good data on the twelve (12) bear markets since 1948. “Days” in the table below is “Duration in days from peak to trough.” Notice the very long duration between the previous high and the trough in some of these bear markets. The two great bear markets associated with inflation (1973 and 1980) each lasted over 600 days from peak to trough.
“Days from trough to new record high” shows how long it takes to make the investor whole after the bear market. The 1973 bear market took over 2,000 days (almost 6 years) to make a new high.
This is a heads-up for METARs who think we are near a bottom or who think that the market will recover soon. The Fed has stated that they want to maintain a “neutral” fed funds rate from now on…a far cry from the 20 years of excess stimulus from the Fed. This is a true trend change. It won’t reach equilibrium for many days. And it may not reach new highs until after the next recession, which could take years.
Peak Trough %Decline Days Next high Days from trough
to new record high
06/15/48 06/13/49 –20.6 363 Sept. 22, 1954 1927
07/15/57 10/22/57 –20.7 99 Sept. 24, 1958 337
12/12/61 06/26/62 –28.0 196 Sept. 3, 1963 434
02/09/66 10/07/66 –22.2 240 05/04/67 209
11/29/68 05/26/70 –36.1 543 03/06/72 650
01/11/73 10/03/74 –48.2 630 07/17/80 2114
11/28/80 08/12/82 –27.1 622 11/03/82 83
08/25/87 12/04/87 –33.5 101 07/26/89 600
03/24/00 10/09/02 –49.1 929 05/30/07 1694
10/09/07 03/09/09 –56.8 517 03/28/13 1480
02/19/20 03/23/20 –33.9 33 08/18/20 148
01/03/22 05/20/22 So far, 161
Wendy
