Here is some current information on the housing market. Mortgage activity hits 22-year low as rising rates bite housing market https://finance.yahoo.com/news/mort...o-decade-low-amid-rising-rates-142215038.html (BOLD is my opinion OR what I consider important content) "A closely watched gauge of mortgage application activity slid to a more than two-decade low last week, as elevated home prices and rising interest rates dragged further on purchase and refinancing activity. The Mortgage Bankers Association's (MBA) weekly market composite index tracking mortgage loan application volume sank 6.5% during the period ending June 3. This represented a fourth consecutive weekly decline and extended a 2.3% drop from the prior week. Refinance applications fell 6% week-on-week and were down 75% compared to the same time last year. Meanwhile, purchases fell 7% from the prior week, and on a seasonally unadjusted basis, were lower by 21% compared to last year. “Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years," Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. "While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week." “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months," Kan added. "These worsening affordability challenges have been particularly hard on prospective first-time buyers.” The MBA's latest report adds to other housing market data underscoring cooling demand as interest rates creep higher. New home sales slid by a much worse-than-expected 16.6% in April to reach a two-year low, while existing-home sales sank to the lowest since June 2020 as the median home listing price soared to a fresh record high of $391,200. The average rate on a 30-year fixed mortgage hovered at 5.09% as of the beginning of the month, according to Freddie Mac data released June 2. While that was a tick down from the 5.10% from the prior week, it was still a jump from the comparable week last year, when the rate averaged 2.99%. The average rate on a 30-year fixed mortgage reached the highest level since 2009 in mid-May at 5.30%." MY COMMENT Certainly not good news for potential buyers or for owners of homes getting used to their new higher home values. Sooner or later the housing markets will stagnate. We may be seeing early signs of this right now. I think that prices will hold up well in a few select cities and areas of the country that are seeing a HUGE influx of people and high end jobs. BUT.......the rest of the country is going to struggle when the stagnation begins.
Here is an article that sums up your comment above. It is important to have a strong and productive energy sector here at home for many reasons. Not only from just an economic standpoint, but for security reasons as well. Chevron CEO Says No New Refineries In U.S—Ever By Julianne Geiger - Jun 03, 2022, 2:00 PM CDT Chevron CEO Mike Wirth’s view of U.S. refineries is that there will never be another new refinery building in the United States. High prices at the pump have triggered a host of discussions around where the market constraints are, but current refinery utilization in the United States—which is at more than 90%--combined with low product inventories and sky-high refining margins, indicates that the bottleneck to getting more gasoline to market is the refining segment—not pumping crude. But according to Wirth, there may be no relief in sight. In an interview with Bloomberg Markets, Wirth describes his rationale for that belief: “Building a refinery is a multi-billion dollar investment. It may take a decade. We haven’t had a refinery built in the United States since the 1970s. My personal view is that there will never be another refinery built in the United States.” According to Wirth, oil and gas companies would have to weigh the benefits of committing capital ten years out that will need decades to offer a return to shareholders “in a policy environment where governments around the world are saying ‘we don’t want these products to be used in the future’”. In Wirth’s view, they are receiving mixed signals in these policy discussions. “We need to sit down and have an honest conversation—a pragmatic and balanced conversation—about the relationship between energy and economic prosperity, national security, and environmental protection. We need to recognize that all of those matter.” Wirth reiterated the industry view that oil and gas producers take a long view of the market fundamentals of supply and demand when settling on capital expenditures. And according to Wirth, it takes years for decisions made today to result in oil. The unique circumstances of the past two pandemic years have only sought to exacerbate the lag between demand and supply as industry workers fled the industry and wells and refineries were taken offline—some never to return. By Julianne Geiger for Oilprice.com More Top Reads From Oilprice.co
Just a bit. What do you mean? I thought it was self explanatory. What did you get out of the article?
I agree with this little article. Don’t Be Fooled by Daily Drama. The Stock Market Is in a Rut. https://finance.yahoo.com/news/don-t-fooled-daily-drama-175143290.html (BOLD is my opinion OR what I consider important content) "(Bloomberg) -- It might not exactly feel like it, but the stock market has been, well, kind of boring. The choppiness and seemingly constant mid-session about-faces are obscuring the bigger picture: the S&P 500 has been vacillating within a roughly 100-point range over the past two weeks. It has stayed above 4,050 since the end of May and pushed over 4,160 earlier in the week, a level it’s had difficulty sustaining. It was around 4,117 on Wednesday afternoon in New York. “We’re trapped in a range,” Anastasia Amoroso, the chief investment strategist at iCapital, told Bloomberg TV, saying investors are trying to decide what the fair value of the market is. “How much are you going to pay for $235 worth of earnings? 16.5x is fair. Maybe 17.5x is fair, which is roughly where we are today,” she said. “But how much more do you push that?” The sideways direction of stocks echoes other parts of the financial markets, where high uncertainty about the direction of the economy, inflation and interest rates has pushed asset prices back and forth based on the latest data. The benchmark 10-year Treasury yield has also been range-bound since it pulled off its highs in early May. Even the notoriously volatile Bitcoin has hovered around $30,000 for a month, failing to break meaningful one way or the other. Investors have become obsessed with whether the Federal Reserve can raise rates enough to dampen inflation without the economy falling into a recession. But that’s still an open question, given that the Fed is at the early stages of its cycle. And for all the executives and economists putting out dire warnings, there’s seemingly just as many predicting the central bank can manage a soft landing. “Markets are going to continue to be choppy until we have reliable evidence that inflation is abating,” said Kara Murphy, CIO of Kestra Holdings. Other evidence also points to the stock market being stuck in a rut. The S&P 500’s rebound from its mid-May lows is following a path similar to previous bounces this year, according to Nicholas Colas, co-founder of DataTrek Research. Colas is tracking the VIX, the volatility index. He says that stocks tend to bottom when the gauge gets to between 29 and 37 and top out when it drifts down to 20. The VIX closed at 24 on Tuesday. “That tells us most of the bounce is done unless fundamentals start to improve,” he wrote in a note." MY COMMENT YES........boring. I have noticed for weeks now that I stay between a LOSS of about 18% and a LOSS of about 20% year to date. The market seems to be very much range-bound at the moment. Sooner or later something will happen that will send the markets off in one direction or the other. Who knows what it will be or when it will happen. The good thing for long term investors......it does not matter what it is or when it is.....it will still be an irrelevant short term event.
oh, we were supposed to click on the hyperlinks? i was just trying to figure out if there was any rhyme or reason to the spacing of the hyperlinks. i saw a link, then 1/2 page of space, then 2 more links. i didn't read any of the articles. should i? is it real news?
Well....we are open. Round and round we go......where we close nobody knows. Looks like the typical recent open. The drag on the markets today.......as is often the case.....the Ten Year yield. It is up.
I like this little article....it deals with a topic yu see in the financial media in the current environment. Strong Dollar Woes Are Weaker Than Many Fear Currency swings just aren’t all that meaningful for corporate earnings. https://www.fisherinvestments.com/en-us/marketminder/strong-dollar-woes-are-weaker-than-many-fear (BOLD is my opinion OR what I consider important content) "Lately—and predictably—we have seen a fair amount of handwringing about the dollar. It seems like just yesterday people were worried it was too weak. Yet now it is supposedly too strong, threatening US multinationals’ earnings. Some companies have already started blaming it for worse-than-expected results. Now, in our experience, the dollar rivals the weather as possibly companies’ favorite scapegoat when lowering guidance for future earnings, and it wouldn’t surprise us if some were merely reverting to old blame habits. For a strong dollar isn’t inherently good or bad—it just is. Conventional wisdom says a strong dollar is bad for big exporters because it can hit revenues. When the dollar is strong, if a company wants to charge the same amount in dollars for a given product sold abroad, it has to raise prices in the receiving country’s currency. That can limit demand. Or, to preserve demand, the company can hold prices in the end market’s currency constant, reducing the amount they get in dollars. Sales volumes may hold up better, but revenues fall, and profit margins take a hit. That is the theory, and mathematically it is true. But it ignores a key mitigating factor: Few companies source all components and manufacture final goods in their home country. The vast majority of firms import parts, raw materials and even labor. A strong dollar makes all of these imported costs cheaper. It may not be a perfect offset for the hit revenues can take under these conditions, but it does cancel a good deal of the effect and help preserve margins. It may even benefit some firms more than the strong dollar hurts sales. But also, beyond this, most companies also hedge for currency swings, limiting the impact of sharp moves. Note that with most companies reporting, S&P 500 gross operating profit margins (revenue minus cost of goods sold, divided by revenue) held pretty darned firm in Q1, slipping less than a quarter of a percentage point from Q2. The numbers bear this out. The last time the dollar was this strong with no associated recession ongoing was in 2018 and 2019. That first year, S&P 500 earnings grew 10.2% y/y, 18.2%, 23.7% and 20.3% in Q1, Q2, Q3 and Q4, respectively.[ii] Growth stayed robust in Q1 2019 at 17.3%. It weakened into the low single digits over the rest of the year, but we think that has more to do with base effects—elevated comparisons from 2018. Said differently, earnings grew slowly off a high plateau in 2019’s last three quarters, even as the dollar stayed elevated. Stocks had a great year, too. Earnings looked worse when the dollar was strong in 2016, but that stemmed from rock-bottom oil prices wrecking Energy sector earnings. Outside Energy, earnings grew nicely, and total S&P 500 earnings bounced nicely in 2017. Then, too, stocks did quite well both years. In our view, dollar fears are telling mostly about sentiment. Whenever investors have the blues, they will inevitably turn to the dollar. If it is weak, we get fears of a weak dollar jacking up import costs, hurting earnings and driving inflation. If it is strong, we get fears like the present. In reality, currency is but one variable affecting profits—and one companies are extremely adept at weathering and planning for. That is a big reason there is no meaningful relationship between the dollar and stocks, and we doubt this time proves different. MY COMMENT I agree. My primary reason is that big companies are......hopefully.....masters at forecasting and hedging. The strength or weakness of the dollar is not something that I care about as a stock or fund investor. It is simply another little piece of general economic data. It is something to read about over the short term.....but.....not something that i consider at all in buying and holding a stock or fund. It fits in with much of the day to day...."stuff"....that I post here out of personal interest. Stuff that is interesting as to the day to day markets and news......but NOT relevant to the long term. Following this "stuff".....keeps me occupied while I sit and do nothing with my stock accounts. Any investor that gets all OBSESSED with all the economic data and stuff that is talked about all day long, every day......will drive themselves CRAZY.
Speaking of economic data......the jobs data is floating around today....not that anyone will really care other than day traders. Stock market news live updates: Stocks fall as bond yields push higher https://finance.yahoo.com/news/stock-market-news-live-updates-june-10-2022-111845609.html (BOLD is my opinion OR what i consider important content) "U.S. stocks extended losses early Thursday as bond yields charged forward. The moves followed data on the labor market that disappointed before the open and confirmation from the European Central Bank of its intention to raise interest rates next month. The S&P 500, Dow Jones Industrial Average, and Nasdaq each fell roughly 0.5% at the start of trading. Weekly filings for unemployment insurance totaled 229,000 last week, the most since January, and a sign of potential stress building in the labor market. Ahead of this data, all three major indexes were pointing to gains north of 0.4% at the open. Oil prices were retreated slightly but held above $120 per barrel, and the U.S. 10-year Treasury yield inched higher to 3.06%, north of the 3% level the 10-year breached earlier this week for the first time since early May. Moves in early trading Thursday come after a down day on Wall Street that saw stocks resume losses after back-to-back sessions of gains. On Wednesday, the S&P 500 shed 1% while the Dow and Nasdaq fell roughly 0.8% and 0.7%, respectively. Investors continue to look for clues on how the economy is faring amid tighter financial conditions and how aggressive the Federal Reserve rate hiking cycle may get before a potential pause. The latest weekly jobless claims report follows strong May employment data last Friday that likely signaled to policymakers current labor market conditions can withstand further monetary tightening. Central bank officials have taken cues from the labor market on the tempo of rate increases as it fights inflation, with policy aimed to cool labor demand just enough not to push the jobless rate too high. "The rise of initial unemployment claims does fit with anecdotal evidence provided by CEOs that they are closely watching their head counts which often covers up for their actions where they are quietly giving out pink slips," FWDBONDS Chief Economist Christopher S. Rupkey said in a morning note. "One thing is for certain, joblessness has nowhere to go but up with inflation boosting costs for every company across the country and cost control measures must be implemented which will likely fall on the backs of labor." Investors are bracing for the Bureau of Labor Statistics’ latest Consumer Price Index (CPI) on Friday – a focal point on the economic data from this week. May’s reading is projected to show inflation slightly abated in May from April's elevated 8.3% rate, with consensus economists looking for headline inflation to rise at a 8.2% annual rate for May, and by 5.9% excluding food and energy prices. Before the open, traders weighed a report indicating the highly-anticipated initial public offering of Jack Ma’s Ant Group was on the horizon. According to Bloomberg News, China is expected to allow the Alibaba (BABA) affiliate to proceed with the listing, a sign that regulators may be dialing on a tech crackdown that halted the IPO two years ago. Elsewhere in markets, shares of Tesla (TSLA) were up 1% following an upgrade from UBS to Buy in a report that also said the electric vehicle giant is “best positioned to become one of the top-3 global car makers by 2030.” 8:36 a.m. ET: Jobless claims hit five-month high last week The latest report on weekly jobless claims suggest some softening in the U.S. labor market. Initial filings for unemployment insurance rose to 229,000 last week, up 27,000 from the prior week and the highest weekly total since the week of January 14. Economists expected initial claims would total 206,000, according to estimates from Bloomberg. Continuing claims for unemployment insurance stood at 1.306 million for the week ending May 28, unchanged from the prior week. Initial claims were a closely-watched source of stress in the labor market in the earliest days of the pandemic, totaling more than 6 million in a single week at the peak in April 2020. Claims have since moved down to multi-decade lows, but economists have flagged this data series as offering the best real-time window into the state of the U.S. labor market. Against this backdrop, the recent rise in initial claims bears close watching into the summer months." MY COMMENT As I have mentioned a few times......people that are playing the jobs game of musical chairs and going to be in for a big shock when they are left hanging with no job. In spite of all the information saying that jobs are plentiful........I believe that there is a disconnect between reality and current thinking. Companies are quickly cutting back and one place they will cut is jobs. Jobs are the one place they can cut costs.....there are not a lot of other options. Bottom line......as usual.....the jobs data and environment is TOTALLY screwed up by the economic shutdown and the free money giveaway. The mess continues with no one really knowing what is going on or why.
I saw a minute ago that the national average mortgage rate is back up to 5.23%.. We are actually getting back into the normal range for mortgages. Not good news for house hunters that got spoiled by once in a lifetime mortgage rates of the past few years. Those super low rates are long gone. I am still amazed how long those rates lasted........it is unbelievable that people could get 30 year mortgage money in the 2% and 3% range. Buyers should get used to REALITY......rates are going to be in the 5-7% range for mortgage money. That is actually the normal range.....and.....not a bad rate to pay. If the FED goes too crazy....we might even see rates go above 7% into the 8-9% range.
Speaking of rates.....the Ten Year Yield is at 3.042%. Not that this is any surprise with the recent FED actions and the coming rate increases that we are going to see over the next 1-2 years. YES......we do need to get back to normal rates.
I can tell that the market is super range bound today.....so far. My account as of a few minutes ago was GREEN.....by less than $300 for the day. My best stock today is Costco.....but....other than that not much is going on in my account to the red or to the green. I actually dont mind a minimal day....if we can hold on. It beats the big drops we have been seeing over the past 5-6 months. We need to do some market consolidation and back-filling here to stabilize the markets. if we can tread water for a while we might be able to sustain a good move to the up-side. The longer we can go without resuming the big drops.....the better the chance that we might have found a little ledge on the market cliff to rest up and stop the short term bleeding. The last 2-3 weeks have been a nice pause in the negative market direction. The short term question is where do we go from here.
How odd. I have dark mode on and the text shows up fine. Let me see if I can adjust the color of the font.
It does seem that way at the moment. To me, I find it a bit surprising we have not fallen further. With all of the economic issues right now...it just feels like we are going to come to a grinding halt and go over that ledge. If one really examines the totality of circumstances we are facing and how it is not being addressed...how are we not in a worse position? I figure until some or even a few of these issues are addressed in a meaningful way, we are gonna just be taken to the woodshed. Any day we can avoid it, is just one more day behind us. Ending on a positive thought...I will stick to my plan and ride it out along with the good days and the bad. We will turn the corner at some point down the road and glad that we stayed on course. It is good we have a place to exchange ideas, thoughts, and express our worries/hopes about our investment plans. I believe it helps us all to be able to do that.
thanks for editing the post, now i can read it. i saw that same report somewhere else. my broker is tdameritrade and they currently do not charge me a trading commission. but, i don't expect something for free. how they make their money behind the scenes doesnt really concern me.
OK.....down we went. Not a big surprise with the inflation data coming out tomorrow and the FED doing another .50% rate increase soon. Today......either people not wanting to be exposed to stocks heading into tomorrow......OR.....people getting advance......(illegal)....access to the data that is going to come out tomorrow. Of course I ended the day in the RED today.....not too badly....between moderate and medium. The good news.....once again I beat the SP500....this time by 0.31%. That might be a good sign that my portfolio is starting to flatten out......since.....before when the markets were down big I would get hammered by the SP500. Is it really as bad as it seems? I dont think so.....the SP500 is only down by (-15.70%) year to date after the close today.
Yeah, I made a small change when pasting the text and it ended up being black on dark. I made it white to look the same as everyone else's text and then it looked odd to you. Oh well, I would rather it look odd to me rather than everyone else. Gotta be a quirk with the theme.
No doubt the markets will not like next week. If we are lucky it will be a situation of the news being so baked in that no one cares. BUT....I am sure the media will be fear mongering the FED all week to the max. June Fed Meeting Preview: Markets Expect Another Big Rate Hike https://www.forbes.com/advisor/investing/fed-meeting-preview/ (BOLD is my opinion OR what I consider important content) "Investors expect the Federal Open Market Committee (FOMC) to continue its aggressive approach to monetary policy tightening at the upcoming meeting on June 14-15. The Federal Reserve will likely deliver its second consecutive 50 basis point (bps) interest rate hike and continue to roll off assets from its nearly $9 trillion balance sheet. The last time the Fed made two 50 bps interest rate hikes (non-consecutive) was in mid 1994. The Fed has been walking a tightrope in recent months, attempting to bring down inflation levels from multi-decade highs without plunging the U.S. economy into a recession. The S&P 500 is down 13.6% year to date on growing concerns that the Fed will not achieve a “soft landing” for the economy. Fortunately, the latest round of economic data shows that the FOMC’s tightening measures up to this point haven’t stalled U.S. economic growth, and there are even some positive signs that inflation may finally have peaked. Great Expectations for the FOMC According to CME Group, markets are currently pricing in a 95% chance of another 50 bps rate hike this month. If the FOMC pulls the trigger on another 50 bps raise, its federal funds rate target rate will be between 1.25% and 1.50%. The Fed is also expected to stick to its previously disclosed plan to allow up to $30 billion in Treasury securities and $17.5 billion in agency mortgage-backed securities (MBS) to mature and roll off its balance sheet per month starting in June. The central bank has said that monthly balance sheet reduction will ramp to $60 billion in Treasurys and $35 billion in MBS per month starting in September. In addition, the June meeting will see a fresh update to the Fed’s long-term U.S. economic projections, including its “dot plot” outlook for interest rates. In March, five out of 16 FOMC participants projected the federal funds target rate would exceed 3% in 2023. Fed economists were projecting U.S. GDP growth of 2.8% in 2022 and 2.2% in 2023. Investors will be watching closely for any potential changes to the Fed’s long-term inflation projections. In March, Fed economists forecasted that the Personal Consumption Expenditures (PCE) price index would rise 4.3% in 2022 but only 2.7% in 2023 as inflation subsides. Economic Growth Remains Steady—for Now So far, the Federal Reserve has avoided a sharp U.S. economic downturn, and there are no signs an economic recession is imminent at this point. On June 3, the U.S. Labor Department reported the economy added 390,000 jobs in May, exceeding economist expectations of 325,000 jobs. The U.S. unemployment rate remained stable at 3.6%, while the labor participation rate ticked higher by 10 basis points to 62.3%. Average U.S. wages were up 5.2% from a year ago and 0.3% month over month in April. Unfortunately, the solid macroeconomic data has been somewhat undermined by news of hiring freezes and layoffs at some of the highest-profile U.S. tech companies. Tesla (TSLA) CEO Elon Musk recently said he has a “super bad feeling” about the economy and plans to reduce Tesla’s workforce by 10%. Apple (AAPL), Twitter (TWTR), Microsoft (MSFT), Nvidia (NVDA), Netflix (NFLX) and Coinbase (COIN) are just a few names on the growing list of companies that have announced they are slowing or suspending hiring or reducing their workforces. Quincy Krosby, chief equity strategist for LPL Financial, says the mixed economic signals contribute to market volatility. “As Fed speakers consistently remind us that the path towards draining inflationary pressures from the economy is going to be ‘bumpy’ and ‘painful,’ the market agrees as it navigates between seeing the next recession around the corner to witnessing a still healthy economic backdrop,” says Krosby. “More talk of hiring freezes and layoffs in the well-paying tech sector could, at some point, convince the Fed that inflation is easing, especially if layoffs broaden beyond the gilded tech world,” he adds. Is Inflation Peaking? The Fed still has a long way to go to bring inflation levels back in line with its long-term target of 2%, but investors have gotten some positive signs in recent weeks that the worst of the inflation crisis may finally be over. In late May, the Commerce Department reported the core PCE price index, the Fed’s preferred inflation gauge, was up 4.9% in April, a slight reduction from the 5.2% gain reported in March. The core PCE inflation number excludes volatile energy and food prices. Brad McMillan, chief investment officer for Commonwealth Financial Network, says the U.S. economy should continue on its positive trajectory in June, which will reassure the Fed that it can continue to combat inflation aggressively. “The primary headwinds to the economy and the markets—inflation and rising interest rates—seem to be pulling back a bit. Inflation is showing signs of starting to roll over, and the Fed is indicating that the market has gotten ahead of itself on its expected rate increases,” McMillan says. Unfortunately, Commonwealth Financial Network head of portfolio management Peter Essele says recent market action suggests investors still see a real risk the Fed could derail the economy. “The second half of 2022 is going to be a roller coaster ride for investors unless the Fed is able to bring inflation under control without a hard landing,” Essele says. “Most investors seem to be wagering on a crash-and-burn scenario at this point as recessionary fears abound and equity markets fail to develop any sort of positive momentum.”" MY COMMENT NO signs of an immanent recession? How about one quarter of negative growth and the second one being on the verge of also being negative. How about the entire content of the second half of the article. NO......the FED has not done a thing to stop or lessen inflation to date. I love this quote in the article: "Most investors seem to be wagering on a crash-and-burn scenario at this point as recessionary fears abound and equity markets fail to develop any sort of positive momentum.”" That pretty much sums up what I anticipate as the FED goes ahead with their rate increases for the rest of this year and much of next year. Here is the understatement of the year from the article: "The Fed still has a long way to go to bring inflation levels back in line with its long-term target of 2%...." Well......YEAH.......and....DUHHHH......they have not impacted or lessened inflation any at all to date. I dont see the FED as having any impact at all no matter what they do.....short of causing a recession or a crash. The current inflation is not being caused by anything that is going to be sensitive to FED action. It would actually be better for everyone if they just quickly crashed the economy and skipped all the pain of the next six months. We may actually see some improvement in inflation over the next six months......nothing to do with the FED......it will simply be due to the comparison numbers and time span helping.
I still think this is a......." slightly likely"......outcome going forward.......not that I care. Beware of a Bear Market That Is More Than a Cub https://www.washingtonpost.com/busi...9.bXbbxUAyuNrKqdHO9yS9lk_jgQ69ijnANW5D9JIrhAg (BOLD is my opinion OR what I consider important content) "The US stock market is experiencing the worst start to a year in five decades. Technology stocks, long a favorite of investors, are collapsing. And yet investors don’t seem bothered. I count five bear or near-bear markets in my adult lifetime, and I don’t recall investors ever being this sanguine about a declining market. One reason might be that, technically, this isn’t a bear market, which is generally defined as a decline of 20% or more from its most recent peak. The S&P 500 Index briefly dipped into bear territory on May 20 but rallied back by the end of the day. It’s down about 14% from its record high in January. So investors haven’t yet been bombarded with scary headlines that typically accompany a bear market. Another reason could be that investors are becoming better at tuning out the market’s gyrations. With every selloff, they gain confidence that the market recovers eventually, even from harrowing declines like the dot-com bust in 2000 or the 2008 financial crisis. That may also explain why, by all indications, most investors hung on to their stocks during the pandemic-induced selloff in 2020. But there may be another, more concerning, explanation. Bear markets have become ever shorter over the past two decades, which may be giving investors the mistaken impression that stock market selloffs are brief, if uncomfortable, affairs. Consider the recent trend. It took the S&P 500 two and a half excruciating years to reach a bottom during the dot-com bust. The next downturn during the financial crisis lasted about 18 months from peak to trough. Then came two near-bear markets, a decline of 19.4% in 2011 that lasted five months and 19.8% in 2018 that lasted three months. And finally, the most recent bear market in 2020 lasted just 33 days. A longer view of history, though, shows no reliable pattern around the duration of bear markets. The record back to 1928 reveals brief downturns sprinkled throughout, according to numbers compiled by investment strategist Ed Yardeni. The 1946 bear market, for example — a decline in the S&P 500 of 27% — lasted about four months. The one in 1957 lasted three months and was followed by two bear markets that each lasted less than a year. But those were followed by four long, brutal bear or near-bear markets from 1968 to 1982. Interestingly, longer bear markets don’t necessarily mean deeper declines. For instance, the S&P 500 dropped 34% during the 33-day selloff in 2020, but it took nearly two years to decline 27% from 1980 to 1982. While the outcome may be roughly the same, duration makes a big difference. In 2020, investors barely had a chance to catch their breath before the market turned higher again. A multiyear selloff, on the other hand, is so painful for so long that many investors eventually give up. It’s easy to underestimate the torment of an extended bear market if you’ve never encountered one. Neither millennials nor members of Generation Z were old enough to experience the dot-com crash, the most recent multiyear bear market. Reading about it isn’t the same as living it, obviously, but for the uninitiated, it’s worth reflecting on the anatomy of that downturn. It was a crash in three acts. The market peaked in March 2000, and tech stocks were the first casualty. The Nasdaq Composite Index declined 15% over the next six months while the broader market was flat. The first sign of contagion came in September. During the next six months, the S&P 500 dropped 27% while the Nasdaq tumbled an additional 61%. By April 2001, it looked as if the worst was over given the severity of the Nasdaq’s decline and that the market had turned higher. It didn’t last long. In late May, stocks turned lower again. The S&P 500 dropped an additional 26% and the Nasdaq declined 38% over the next four months. By the fall of 2001, the pain was palpable. Stock portfolios evaporated, and the red on Wall Street spilled into the broader economy, sending it into recession. Surely, that was the end, or so it seemed when the market rallied through late fall and winter. Then came the knockout punch. From March 2002 to the bottom in October, the S&P 500 gave up an additional 34% and the Nasdaq dropped 41%. When it was all over, the S&P 500 was cut in half, down to 777 from 1,527 when the bear market began, and the Nasdaq had given back nearly 80% of its value. There’s no way to know in advance if the market has already bottomed or is on the precipice of a longer decline, even in the face of obvious headwinds such as high inflation, tighter monetary policy and war in Ukraine. But one thing is certain: Stocks were vulnerable during the dot-com era because valuations had become absurdly high, leaving them plenty of room to reprice. When 2000 began, the S&P 500 traded at 28 times forward earnings, well above its average, which is closer to 18 times. The market wasn’t that expensive again until late 2020, when its valuation floated back up to 27 times. It has since contracted — the S&P 500 now trades near its historical average of 18 times. But the market has a habit of overcorrecting. During the dot-com bust, the S&P 500 bottomed at 16 times, and it dipped closer to 11 times during the financial crisis. So it has further room to fall, particularly if earnings disappoint. Whatever happens, investors know they must hang on because the market will eventually climb to new highs, as it always has. But the longer this downturn drags on, the harder it will be. " MY COMMENT Some real enjoyable reading here. Real history.....not fantasy. That 2000 dot-com crash bear market was a killer. I enjoyed the fun of having retired at age 49 in early 1999......one year prior to the collapse. I made it through and came out the other side alive....but it took all my investing, business, and money management skills to do so. I hate to say it.....but actually....my memory of that time is that it was not as bad as the conditions that are all piled up right now. On the positive side.......the economy back than was based on delusion...many of the companies that skyrocketed were barley in existence.......it was a FAKE economy. It was during that time when I rode a small position in CISCO....from $25,000.....up to $250,000.....and by the end back down to $25,000. If this time ends up being a major.....historic.....bear market drop.....all the young investors will have something to talk about in ten or twenty or thirty years on message boards. Assuming that message boards exist at that time in the future. The worst thing now.....incompetence spread across many levels of government.......and......a total vacuum of strong leadership with the vision to see how to navigate all the current issues. That is why I put the odds of a dot-com crash style bear market at......"slightly likely". One thing is always true......in any time......we live in interesting times.
