The Long Term Investor

As we wait for the close today....I know already that I am perhaps about TWO negative market days away from touching my year to date LOW. After that I will be heading down to new year to date lows. Yes....I expect it to happen. No....I dont have any plans to do anything in response. Fortunately......I dont have any need to use ANY of my stock market money at any time over the remainder of my lifetime.

I continue to be fully invested for the long term as usual.

 

ANOTHER very nasty week in he books as we move forward toward the end of this year. I was SOLID RED today....with NIKE being my big hit for the day. I also got hammered by the SP500 by 1.91% today.

I dont see anything changing in the near term.....regarding the FED, inflation, or the general economy.

 

Here is our sad tale of woe.

DOW year to date (-20.94%)
DOW for the week (-2.91%)

SP500 year to date (-24.75%)
SP500 for the week (-2.90%)

NASDAQ 100 year to date (-32.77%)
NASDAQ 100 for the week (-3.01%)

NASDAQ year to date (-32.40%)
NASDAQ for the week (-2.69%)

RUSSELL year to date (-25.86%)
RUSSELL for the week (-0.89%)

Nothing good above...except for the fact that we are DONE with another week in general and this week in particular.

 

That is exactly what I will do Smokie.

I have a long day tomorrow with shows.....about an EIGHTEEN HOUR day....minimum. We will leave about 9:00AM......drive.....and than do two shows at an event that is expected to draw about 25,000 people. Once they shows are done we will drive straight back.

That is my day tomorrow. It will be a BLESSING to have the markets closed for the next two days.

 

I did not calculate where I am right now in the markets.......but....I expect that I have now lost about TWENTY FOUR MONTHS. I am counting nine months of this year as a loss. I am counting that the gains of last year.....12 months..... are now lost. AND....I am back somewhere into year 2020....with where I "probably" am right now.

LOL....I guess I am now back in the PANDEMIC.

Looking forward....I dont see any "possibility" that 2022 will end up as a positive year for stocks or funds. The ONLY.....slight "chance".......for a HAIL MARY that I see out there.......is the election kicking off a major rally.

The rest of the year....starts on Monday.

 

This little article is a pretty good summary of the markets for the year and for the past quarter. Next week we start the 4th quarter. I am not going to post this content since we ALL lived it day by day. For anyone interested just click the link and.....ENJOY.

Stock market news live updates: Stocks plummet to close out brutal third quarter for Wall Street

https://finance.yahoo.com/news/stock-market-news-live-updates-september-30-2022-112137262.html

 

Searching for any little bit of GOOD financial news.....here it is.

We are now about TWO WEEKS from the release of the Social Security cost of living raise for 2023. It should be a BIG ONE....probably somewhere between about 8.5% and 9.0%. EVERYONE on Social Security will get it.

YEA......I want my free government money. Well not exactly free.....I paid for it over my work life...often at the self employed rate of about 15%.

 

I mentioned the Social Security cost of living raise for 2023 above. Here is the FIRST little raise for anyone on Social Security.

Seniors to get a break on Medicare Part B premiums in 2023

https://www.wmtw.com/article/seniors-get-break-on-medicare-part-b-premiums-2023/41406135#

(BOLD is my opinion OR what I consider important content)


"Medicare beneficiaries will see their Part B premiums decrease in 2023, the first time in more than a decade that the tab will be lower than the year before, the Centers for Medicare and Medicaid Services announced Tuesday.

The standard monthly premiums will be $164.90 in 2023, a decrease of $5.20 from 2022. The reduction, which was signaled earlier this year by Health and Human Services Secretary Xavier Becerra, comes after a large spike in 2022 premiums. Medicare beneficiaries had to contend with a 14.5% increase in Part B premiums for 2022, which raised the monthly payments for those in the lowest income bracket to $170.10, up from $148.50 in 2021.

President Joe Biden highlighted the drop in premiums at an afternoon event in the Rose Garden on Tuesday, using the announcement to tout Democrats as the party that will protect Social Security and Medicare.

That message -- targeted toward the key demographic of older voters -- comes six weeks before the midterm elections.

Biden criticized the plan laid out recently by House Minority Leader Kevin McCarthy and Republicans, calling their agenda a "thin set of policy rules, with little or no detail." The president also slammed Republican Sens. Ron Johnson of Wisconsin and Rick Scott of Florida for their plans that suggest Social Security and Medicare should be discretionary spending rather than mandatory programs.

"What do you think they're gonna do when the House Budget Committee started talking about cost of Medicare and Social Security and why we can't afford it?" Biden asked the audience in the garden.

Relief after big premium increase

A key driver of the 2022 hike was a projected jump in spending due to a costly new drug for Alzheimer's disease, Aduhelm. However, since then, Aduhelm's manufacturer has cut the price and CMS limited coverage of the drug. The agency said it would factor the lower-than-forecast spending into the 2023 premium.

Also, spending was lower than projected on other Part B items and services, which resulted in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.

The annual deductible for Medicare Part B beneficiaries will be $226 next year, a decrease of $7 from 2022.

Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment and certain other medical and health services not covered by Medicare Part A.

One of the benefits of the Inflation Reduction Act, which Congress passed in August, will also kick in next year for Medicare beneficiaries. Starting July 1, cost-sharing will be capped at $35 for a one-month supply of covered insulin. Also, people with Medicare who take insulin through a pump won't have to pay a deductible. This benefit will be available to people with pumps supplied through the durable medical equipment benefit under Part B.

The Medicare Part B premiums comes as seniors are also expecting a larger-than-usual increase in their Social Security payments. The annual cost of living adjustment, which will be announced next month, is being fueled by high inflation.

For 2022, seniors received a 5.9% increase, the largest in decades, but it was quickly overrun by soaring price increases.

The Senior Citizens League projects that the 2023 increase could be 8.7%, which would bump up the average retiree benefit by $144.10 to $1,656."

MY COMMENT

Every little bit helps. This reduction is simply to adjust the premium to REALITY versus....anticipated expenses to the program.

Since this premium comes out of your Social Security benefit......my wife and I will see an increase in our Social Security in the amount of $10.40.......per month.

 

We begin a new week tomorrow. Same issues......nothing new. One thing is sure.....if you have the time horizan, the mental capacity (guts), and the psychological strength.

There's more upside than downside for long-term investors

https://finance.yahoo.com/news/ther...wnside-for-long-term-investors-153058301.html

(BOLD is my opinion OR what I consider important content)

"Last week, stocks tumbled to their lowest level since November 2020. The S&P 500 fell 2.9% to close the week at 3,585.62. The index is now down 25.2% from its January 3 closing high of 4,796.56.

There were some unnerving developments in the world in recent days.

• The U.K. government unexpectedly announced tax cuts that sent the British pound tumbling and drew criticism from the IMF.
• The Nord Stream gas pipeline was damaged, putting Europe’s energy security at greater risk.
• Russia announced the illegal annexation of regions in Ukraine.
• Corporate America — according to Apple, Nike, Micron, and CarMax — is not selling as much stuff as planned.

Federal Reserve officials, meanwhile, continue to reiterate the central bank’s hawkish stance despite falling stock prices and the rising risk of a recession.


It’s unclear how all of these events will unfold. And there’s no telling what other news may emerge that could destabilize world financial markets.

We do, however, know there’s a long history of events that rocked the markets and shocked the economy. And we also know that the markets and the economy eventually emerged stronger. Read more here, here, and here.

There’s lots to learn from stock market history. One thing is for sure: If you can commit the time, you don’t want to miss the rally.

The market always comes back stronger: The chart below comes from eToro’s Callie Cox. It shows the percentage losses in the S&P 500 during bear markets since 1956, and the percentage gains in the bull markets that followed.

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It’s a reminder of TKer Stock Market Truth No. 4: Stocks offer asymmetric upside. In other words, while you can only lose as much as you put in, you can earn multiples of what you put in on the upside.

The first two years of recoveries are huge: This table comes from Carson Group’s Ryan Detrick. In year one of a market recovery, the S&P 500 has returned a whopping 30% on average. In year two, the S&P 500 adds another 37% on average.

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The good days happen near bad days: From Vanguard’s Greg Davis: “Successfully timing the stock market is near impossible, partly because the best trading days tend to cluster around the worst ones. And missing just a few of those rally days has a surprisingly outsized impact. Looking at market data going back much further, to 1928, being out of the stock market for just the best 30 trading days would have resulted in half the return over that period.“

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For more on how the best days often follow the worst days, read this.

Stocks can rally as unemployment climbs: The chart below comes from JPMorgan Asset Management’s Q4 Guide to the Markets. It shows how the S&P 500 (green line) and the unemployment rate (purple line) moved around the last nine recessions (shaded area).

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As you can see, there are many instance where stocks will rally as the unemployment rate climbs for months. This is notable and timely as we prepare for the U.S. labor market to cool. It’s also a reminder that stocks are a discounting mechanism, pricing in what’s expected to happen and not what’s currently happening.

None of the above stats will tell you much about where the market will be in the next few days, weeks, or months. We could be at the bottom. Or we could go much lower.

But for long-term investors, time in the market matters more than timing the market.

“It pays to remain invested and balanced precisely when it is most difficult to do so,” Davis noted.

MY COMMENT

YEP.....what is going to happen is unknown to EVERYONE. We could be near a bottom right now.....or.....we could have another 10-15% to drop. The bear market could last for another 3-6 months......or....it could last for another 2 or 2.5 years. No one knows.....especially the experts and the FED.

In the end it is ALL......a function of time. Time cures ALL ills in the economy and the markets. The question for any investor is....do you have the time that it might take to get back what you have lost..... or, will lose? AND.....do you have the mental and financial capacity to wait it out....in other words risk tolerance.

The bottom line for ANY INVESTOR.....in the end......you have to do what is right for you.

 

I have been siting and watching the markets since about a half hour before the pen. We seem to be at a peak for the day so far at this moment. A nice open.

 

I like this little article.

Sour Sentiment Outside Equities
Returns are down across the board this year.

https://www.fisherinvestments.com/en-us/marketminder/sour-sentiment-outside-equities

(BOLD is my opinion OR what I consider important content)

"Stocks’ jarring week continued Thursday as the S&P 500 dropped -2.1%, closing a whisker below Tuesday’s low and bringing the bear market’s magnitude to -23.2%. While that isn’t large by historical standards, retesting the lows after a summertime rally has understandably weighed on investors. Yet the mood seems to be one of frustrated resignation than outright panic, and we have a hunch why—and in a perhaps counterintuitive way, we think it argues for the recovery lying closer than many seem to expect now.

Last week, we looked at stock and bond mutual fund flows and considered the possibility that the panic selling known as capitulation was occurring more in bonds than stocks. That wasn’t a short-term market forecast, mind you, but an attempt to explore why investors’ behavior wasn’t quite typical for a late-stage stock bear market. This week’s bond market volatility seemingly underscores this hypothesis, judging from the sharp moves, reports of forced selling as pension funds scrambled to raise collateral, and the widespread presumption that much, much worse is in store for fixed income. That all suggests investors are taking their frustration out on bonds more than stocks right now.

Yet it isn’t just bonds that are down alongside stocks this year, and while it may be cold comfort, stocks are in the middle of the pack relative to other categories. Exhibit 1 shows year-to-date returns in US; World; Europe, Asia and Far East (EAFE); Emerging Markets and Japanese stocks (which we include due to Japan’s reputation as a safe haven), as well as two broad US bond indexes and the two flagship cryptocurrencies. Returns are as of Wednesday’s close, since Thursday’s tallies aren’t in across the board as we write, but one day won’t change the overall picture much. And that picture shows that if you are looking for an alternative to stocks, there really isn’t anywhere to go. Even the bond declines don’t quite capture the full picture, as fixed income’s grueling decline began before 2022. Supposedly defensive Japan is underperforming the US and global stocks. Crypto has crashed hardest of all.

Exhibit 1: A Very Frustrating Year


Source: FactSet, as of 9/29/2022. S&P 500 total returns; MSCI World, EAFE, Emerging Markets and Japan Index returns with net dividends; ICE BofA US Corporate & Government (7-10 year) and US Treasury (7-10 year) Index total returns; and bitcoin and ethereum price returns, 12/31/2021 – 9/28/2022.

You may have noticed there is one obvious alternative missing from that chart: gold. Its full-year declines are mildest of the lot, which perhaps seems encouraging at first blush. Yet cumulative returns don’t quite tell the full story. As Exhibit 2 shows, gold initially rallied as tensions between Russia and Ukraine reached the boiling point, and its run continued through the war’s first two weeks as commodity markets globally spiked. But since March 8, gold is down -19.0%, dwarfing global stocks’ decline.

Exhibit 2: Gold Isn’t as Shiny as It Might Appear


Source: FactSet, as of 9/29/2022. MSCI World Index returns with net dividends and gold price, 12/31/2021 – 9/28/2022.

Cash is of course another option, but it is hardly more enticing given banks haven’t raised deposit rates alongside the fed-funds rate this year, so savers continue earning a pittance as inflation erodes purchasing power—another knock on sentiment.

We suspect this has all left stock investors feeling unhappily stuck, resigned to sour returns wherever they look. That is the bad news. The good news? Bull markets begin when everyone least expects them to. Sometimes that unfathomability manifests in panic selling, but on other occasions—like 1966 and 1982, based on our analysis of those periods—it perhaps looks more like frozen exhaustion. So from that standpoint, the conditions we see today are actually a rather good backdrop for a new bull market to start. The precise timing is unknowable, and it won’t be clear until we all have significant hindsight, but our point here isn’t about market timing and precise predictions. Rather: If you have stuck with stocks thus far, while the decline to date has been painful, it is only a loss if you sell. If you hold fast and participate in the bull market that follows, whenever that materializes, stocks’ rise erases that temporary decline and carries you up the path to your long-term goals."

MY COMMENT

It is amazing to me that ANYONE owned bonds leading up to this recession. The rates were OUTRAGEOUSLY low....causing massive exposure to principle risk when rates started to rise. To each their own.

GOLD......so much for GOLD being a hedge against anything. It was and is ALL illusory. Now that Crypto is the rage......gold being priced UP as a hedge against anything is the past.

 

Markets are starting to run away today. Here is how we are starting the day, the week, and the month.

Stock market news live updates: Stocks rise sharply as Wall Street crawls out of a brutal September

https://finance.yahoo.com/news/stock-market-news-live-updates-october-3-2022-104213864.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks bounced Monday morning after the S&P 500 and Nasdaq Composite closed out their first three-quarter losing streak since the 2008 Global Financial Crisis and the Dow logged its first such span of losses since 2015.

The benchmark S&P 500 index gained 1% at the open, while the Dow Jones Industrial Average jumped 330 points, or around 1.2%. The technology-heavy Nasdaq Composite advanced 0.7%.

Sizeable moves in energy markets kicked off the week, with oil prices swinging higher as reports surfaced that OPEC+ is considering a big production cut of more than one billion barrels per day. West Texas Intermediate (WTI) crude oil futures surged 5.6% to $83.99 per barrel, while Brent crude climbed about 3.9% to $88.45 per barrel.

On the corporate front, shares of Credit Suisse (CS) fell 3% at the start of trading after the global investment bank’s CEO issued a memo over the weekend attempting to calm major investors about the institution’s financial health – an effort that backfired and instead raised questions about its financial stability.

The bank said last week that it was exploring potential sales of assets and certain business units as part of a strategic plan set to be revealed at the end of the month.

Tesla (TSLA) stock was also a mover Monday morning after the electric vehicle giant reported Sunday that it delivered 343,830 cars in the third quarter, a fresh record that came even as the company grappled with the shutdown of its China factory. Still, the figure came in below Wall Street expectations, which ranged from 358,000 to 371,000 vehicles. Shares fell more than 6% early into the session.

Investors are reeling from a brutal month and quarter that saw all three major averages enter a bear market. In September, the S&P 500 recorded a 9.3% loss, its worst monthly decline since the onset of the pandemic in March 2020. The Dow erased more than 8% and the Nasdaq Composite more than 10%. For the quarter, the indexes shed roughly 5.3%, 4.1%, and 6.7%, respectively.

As Wall Street turned the page, some strategists look ahead to October, which has been deemed a “bear-market killer” based on historically strong returns, especially in midterm election years. Every time the S&P 500 has dropped 7% or more in September, stocks have done well in October, Carson Group’s Ryan Detrick noted.

A high-stakes earnings season likely to be wrought by slashed forecasts and worsening fundamentals tied to inflation and rising interest rates, however, makes this time different.

“The focus will be on earnings because we’re going from a moderation shock, with higher interest rates, to a growth shock,” Luca Paolini, chief strategist at Pictet Asset Management, told Yahoo Finance Live in a recent interview. “This is where we feel more worried, and next earnings season is going to be really critical.”"

My COMMENT

The above is where we have been.......but....all that counts now is where we are going as we move forward in the year, the economy, and the markets.

As usual.........it will ALL be about EARNINGS for the next month or two.

 

This is an interesting side-story that is out there in the media right now. It is not the top headline but up there in the list. For the most part I dont hear too much about this. What i find interesting is......these are the EXPERTS......the big deal makers, the investment bankers, the experts in finance and economics. Yeah right....just more proof that the financial world is full of fools and empty suits. These big banks are GIFTED massive advantages by governments around the world......yet.....this is what you get.

Credit Suisse Is in Deep Trouble

https://www.msn.com/en-us/money/savingandinvesting/credit-suisse-is-in-deep-trouble/ar-AA12vw3K

(BOLD is my opinion OR what I consider important content)

"The Swiss banking giant is embroiled in a succession of financial scandals that now threaten its future.

Will Credit Suisse (CSGKF) pull through?

Speculation surrounding the future of the Swiss banking giant has been going on for several months in the markets, in business and political circles, as well as on social networks.

The No. 2 Swiss bank and one of the largest banks in the world is in deep trouble and is currently fighting for its survival. A negative outcome is likely to cause a shock similar to that caused by the bankruptcy of the U.S. bank Lehman Brothers in September 2008. This event triggered one of the most serious financial and economic crises since the Great Depression.

Nightmare

A year ago, Credit Suisse had a market capitalization of $22.3 billion. Today, its market value is only $10.4 billion. Credit Suisse shares fell 56.2% in one year to $3.98.

It is a real nightmare for the bank which had succeeded in weathering the financial crisis without losing too many feathers. At the time of this crisis, Credit Suisse shares had certainly fallen but they were down only to the level of $45, which seemed to be a feat for a bank at the time.

Credit Suisse shares began the month of October on Monday, Oct. 3, as they had ended the month of September, that is to say in sharp decline. Shares were indeed down nearly 8% at last check.

Spreads of the bank’s credit default swaps (CDS) have risen sharply in recent days. CDS are financial products that are similar to a form of insurance against default, for example.

What happened? How did we get here?

In recent days, employee morale has been gloomy. The bank has not yet renewed the contracts of certain contractors. Departures are no longer really replaced, TheStreet has learned. It is austerity cure.

The talent is leaving. The bank has just lost one of its senior dealmakers, Jens Welter, who left to join Citigroup after 27 years with the establishment. Welter was global co-head of banking when he left. Another departure is head of global credit products Daniel McCarthy.

"I am conscious that there is lots of uncertainty and speculation both outside and within the company," Chief Executive Officer Ulrich Körner told employees in a memo on Sept. 30. "While you will appreciate that I am unable to share details of our transformation plans before October 27, I also want to make sure that you hear from me directly during this challenging period. I will therefore be sending a regular update to you all until then."

In this memo seen by TheStreet, the CEO explained that "this is a critical moment" for the bank and warned employees that the rumors and speculations will continue and will become even louder.

Stock Price vs. the Company's Health

He assured them that the stock price does not reflect the financial health of the firm.

"I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank," he said.

"We are in the process of reshaping Credit Suisse for a long-term, sustainable future - with significant potential for value creation," Körner added. "I am confident we have what it takes to succeed."

For many industry sources, Credit Suisse does not at first sight pose a systemic risk because the bank's problems are specific to the Swiss bank. In 2008, the difficulties of Lehman Brothers were problems experienced by other banks as well.

Credit Suisse is a universal bank, which offers traditional services and products to consumers, mainly in Switzerland. But the establishment is known globally for its investment banking activities - trading, deals such as mergers and acquisitions, bonds, securities, etc - and wealth management operations. It is the investment bank which put the firm in these difficulties, even if it was, for a very long time, one of the big sources of revenue and profits for Credit Suisse.


The Scandals: Greensill, Archegos

Indeed, the mistakes of the investment bank have plunged Credit Suisse into numerous successive scandals in recent years, reviving speculation about its bankruptcy or its merger with its rival UBS.

Two scandals occurred almost one after the other in 2021 and caused losses of several billion dollars to the bank.

The first is the bankruptcy of Greensill. Founded in 2011, the British company is a supply chain and accounts receivables lender, that specializes in lending money to companies so that they can pay their suppliers. It then packages the debts of these companies into financial securities which it resells to investors.

The house of cards began to crumble when these investors, including Credit Suisse, had doubts about the real value of the debts and abandoned Greensill, which then filed for bankruptcy in March 2021.

Credit Suisse invested $10 billion of its clients in Greensill products.

The second scandal in the spring of 2021 involved family office Archegos Capital Management. Bill Hwang is a South Korean investor based in New York. Tiger Asia, a company he funded in the 2000s, suffered a major setback in 2012 because of insider trading allegations. Hwang gradually revived Tiger Asia which became Archegos.

While his company would manage $10 billion, Hwang convinced banks, including Credit Suisse, to lend him $30 billion to invest more. In 2020, he invested heavily in ViacomCBS (VIACA) - Get ViacomCBS Inc. Class A Report, which saw the value of its shares soar.


Oct. 27: D-DAY

At the beginning of 2021, Credit Suisse asked Archegos to deposit funds. Hwang promised to reduce the risks. But in March 2021, ViacomCBS shares crashed and the banks asked Archegos to cover the losses, which it was no longer able to do. As a result Hwang's company went bankrupt.

"The investigation found a failure to effectively manage risk in the Investment Bank’s Prime Services business by both the first and second lines of defense as well as a lack of risk escalation," an independent investigation ordered by Credit Suisse concluded.

"In the same business, it also found a failure to control limit excesses across both lines of defense as a result of an insufficient discharge of supervisory responsibilities in the Investment Bank and in Risk, as well as a lack of prioritization of risk mitigation and enhancement measures (such as dynamic margining)."

To avoid filing for bankruptcy, Credit Suisse has promised to present a strategic plan on Oct. 27. This should include the divestment of investment banking activities, the black sheep, speculate the markets.

The bank "is well on track with its comprehensive strategic review including potential divestitures and asset sales," it said on Sept. 26.

Survival requires refocusing on wealth management, industry sources say."

MY COMMENT

As I was in the process of posting this article......I heard this being talked about on a TV financial show.

The danger from this sort of stuff is.....till there is a collapse or crises....no one has any idea how interconnected these big banks are. BUT.....I dont see any real impact here in the USA from this. The EU...that might be a different story.

So much for the EXPERTS....at least at Credit Suisse. Amazingly.....these are the people that walk around looking down their noses at the little people.

 

I just looked at my account today. At the moment I am siting on a year to date LOSS of (-29.5%). I am about one or two down days from being back at my year to date low.

The markets have ALREADY BREACHED their June year t date low. If we could get a nice strong week this week.....I might be able to stave off doing the same.....for a while.

I actually thought I would be worse off than a loss of 29.5%.

 

A nice little article.....with a positive ending thought.

Op-ed: The fourth quarter begins, and here is what the 2022 bear market has taught us

https://www.cnbc.com/2022/10/03/op-...-what-the-2022-bear-market-has-taught-us.html

(BOLD is my opinion OR what I consider important content)

"Am I becoming rueful that 2022 will end soon, and we will embark on the unknowns of 2023? Are you joking? The market is more skittish than my dogs in a thunderstorm and less agreeable than my husband when I want to “take back” a word in Scrabble.

Under no condition will I regret the departure of 2022, even if we have a decent rally in the fourth quarter.

This brings us to a central point: Was there anything other than the well-documented and lamented surging inflation from the stimulus and zero-interest rate-fueled demand that precipitated the bear market we’ve endured this year?

I like to call it “Covid Revenge,” and I don’t mean a Paxlovid rebound. When the market began to take the virus seriously — even though most governments hadn’t — on Valentine’s Day 2020, investors unleashed a flood of selling that sent the S&P 500 down 32% in five weeks.

At that roughly 2,305 S&P level — merely one week after most cities, states, and countries around the world shut their schools, courtrooms, offices, restaurants, stores, arenas and airports, but before we had any idea what the human toll of Covid would be — the market soon began to reverse course and climb.

A steady climb, then a descent back to Earth

With only minor interruptions, the S&P climbed steadily for 21 months. The index doubled from its March 2020 trough, and it advanced 40% from its prior high in February 2020. Whether the market was propelled by unbridled optimism about potential vaccines, convinced that shutdowns could only last so long or unfazed by the economic damage caused by the pandemic, it moved upward with remarkable determination.

This trend persisted unabated through shutdowns, reopening, vaccine development and approvals, stimulus checks galore and 1 million Covid deaths across the U.S. The halo remained in place until the very end of 2021. At that point, exhausted from traipsing uphill for so long, the S&P ended its run at 4,766, more than double the 2,305 threshold in March 2020.

The S&P 500′s descent to Earth from lofty heights

The market is not, however, in the habit of giving something for nothing, and the 100% gain might have been conditional on factors that were impossible to achieve. There were no policymakers with any experience in pandemics. That meant the likelihood that they would successfully design and execute the right-sized stimulus and bailout plans for citizens, companies and institutions, plus astutely manage the monetary strategy, was extremely low.

If the market expected continued growth – or at worst, a soft landing – the tremendous infusion of cash in people’s pockets, combined with the Covid-ravaged supply chains, were destined to push prices to the moon. That inflation has triggered earthquake aftershocks. Unfortunately, those assumptions were too rosy for the market. Covid Revenge pulled stock prices back to Earth.

A potential washout in sight

On the week ending Sept. 21, across the NYSE listings of stocks with market capitalizations above $3 billion, there were 386 stocks down over 40% from their 52-week high. Some 220 stocks fell over 50%, and 122 dropped more than 60%.

The ARK Innovation ETF, the best-known gathering of ultra-high growth technology companies in the hottest sectors of software, cloud computing and more, has lost about 70% from its peak in 2021. That’s revenge on the once-naïve cohort of Covid-minted investors who poured money they weren’t spending on trips and restaurants into funds and stocks on their favorite trading platform. The market taught them what happens when you fail to contemplate the possibility that interest rates will rise above zero, imploding the value of a dollar earned many years in the future.

The pain is deeply entrenched across global markets and is seeping into world economies. At its peak, the S&P was up 41% from the pre-Covid highs. Now, we are about 6% above that 3,380 level as of Sept. 30. How’s that for revenge?

Now, we need to find the bottom. There may be some signs that the switchblade is getting dull. Some of the worst performing names in the S&P over the last year and a half, such as PayPaland Netflix, became so washed out that they have outperformed the market in recent months.

The price-to-earnings multiple of the S&P 500, which was 21.5 times the next twelve months’ estimates at the beginning of this year, is now 16 times 2023 estimates, assuming almost no growth. With bearishness so palpable we can hear it jump off every screen, we must be within sight of a level that will not elicit revenge on those intrepid buyers."

MY COMMENT

Everything we are seeing in the markets today is the result of the actions taken by government to deal with the pandemic. They shut down the economy, gave out money like candy, totally screwed up worldwide supply chains and manufacturing, etc, etc, etc.

NOW.....they are determined to crash the economy......but even than they will REFUSE to call it a recession.