The Long Term Investor

Hoping for an......."inflation data was not quite as bad as expected".....relief rally tomorrow. BUT......"hope" is not an investment strategy.

 

No surprise here.

The US job market is rapidly cooling off: Goldman Sachs

https://finance.yahoo.com/news/goldman-sachs-calls-for-labor-market-slowdown-105325689.html

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

"Add that 14th job to your LinkedIn profile while the getting is good, as the U.S. labor market is poised to markedly slow down later this year, warns Goldman Sachs.

"Softer company-level hiring expectations and slower GDP growth in the second half of the year point to slower payroll growth in coming months," said Goldman Sachs chief economist Jan Hatzius in a new note on Friday. "Recent anecdotes of hiring freezes and more selective hiring indicate that companies expect payroll growth to slow, and the most recent business activity surveys corroborate these signals."

Hatzius forecasts employment growth of 215,000 jobs per month for the next three months. That is that poised to cool to 160,000 jobs added a month for the ensuing six months.

This slowdown would see the economy's pace of growth job fall more than 50% from current levels; through May, nonfarm payroll growth over the prior three months has averaged 408,000.

The U.S. economy added 390,000 jobs in May, above economist estimates for 328,000 but a tick down from an upwardly revised paced of 436,000 in April. May represented the lowest monthly gain in jobs since April 2021.

A slowdown in the red-hot labor market appears to be taking hold as companies begin to hunker down for a potential recession in 2023.

Layoff announcements have risen notably in the tech sector, as companies have come under pressure amid heightened stock market volatility and rising interest rates.

E-commerce site Stitch Fix (SFIX) said Thursday it will axe 15% of its corporate workforce as it deals with a slowdown in sales and increased losses. Electric scooter player Bird (BRDS) announced this week it would layoff 23% of its workforce as it clamps down on expenses.

Netflix (NFLX) and Robinhood (HOOD) have also cut jobs after lackluster first quarters, while Coinbase (COIN) has frozen new hiring and even rescinded some already-accepted job offers.

More than 17,000 workers in the U.S. tech sector have been canned in mass job cuts year to date through June, according to data from Crunchbase.

"The U.S. economy remains strong approaching mid-year," EY-Parthenon Chief Economist Greg Daco wrote in a note to clients, "but cracks are starting to appear in the foundation.""

MY COMMENT

BUMMER......for those that think they have some kind of sword that they can hold over the heads of employers. We are about to get back to a normal jobs market......and......any advantage on the part of job hunters is going to quickly disappear.

The current job market is a MYTH anyway. Just because you see signs begging for workers at $15 an hour jobs does NOT mean that the big corporations are going to throw jobs at everyone that walks in the door.

 

I have a mid-day show today so I will be leaving shortly after the open. Nothing I can do about the markets anyway. I will find out what happened today when I get back about 5:00.

We are in the middle of a heat wave right now....with temperatures going to be in the low 100's. Unfortunately for me the show today, tomorrow, and Sunday are......ALL......outside.

 

Eight thirty is the key time today when the inflation data will be released in the Consumer price Index.

Stock market news live updates: Stock futures mixed before key inflation data

https://finance.yahoo.com/news/stock-market-news-live-updates-june-10-2022-111928913.html

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

"U.S. stock futures struggled for direction Friday morning as investors awaited an update on inflation, which is expected to hover near a 40-year high amid elevated prices for gas, food and a variety of other goods and services.

Contracts on the S&P 500 and Dow were each off by about 0.2% in pre-market trading. Nasdaq futures traded flat to slightly higher. Treasury yields rose along the short-end of the curve, while the benchmark 10-year yield steadied around 3.03%. U.S. crude oil prices rose 0.7% to trade above $122 per barrel, holding near the highest level since March.

For market participants, the Bureau of Labor Statistics' 8:30 a.m. release of the Consumer Price Index (CPI) will be a key print, offering a fresh look at the extent to which price increases have persisted across the U.S. economy. Consensus economists are looking to see inflation rose 8.3% year-on-year in May, according to Bloomberg, matching April's clip and coming in just a hair below March's more than 40-year high rate of 8.5%.

CPI is also likely to accelerate to a 0.7% month-over-month clip in May from April's 0.3% rise, tracking a surge in gas prices heading into the summer travel season. Core inflation, which excludes volatile food and energy prices, is expected to edge down only modestly to a 5.9% annual gain from April's 6.2%.

Inflation has remained a dominant issue for investors, policymakers and the American public this year. Higher prices have threatened to weigh on consumer spending — the key driver of U.S. economic activity — as goods and services become increasingly unaffordable. And inflation has already shown signs of triggering a rotation from spending on some discretionary goods to other purchase areas.

And for investors, inflation has also become a key determinant in the path forward for the Federal Reserve's monetary policies. As the Fed aims to help bring down fast-rising prices, the central bank is widely expected to raise interest rates by another half-point at next week's policy-setting meeting, further increasing the cost of borrowing and doing business for companies.

Amid these concerns over inflation's impact on the economy and Fed's next moves, stocks have continued to trade choppily. Each of the three major averages was on track to post a back-to-back week of losses, based on Thursday's closing prices. The S&P 500 headed for a weekly decline of about 2%.

"At the end of the day, markets are just faced with a whole lot of uncertainty right now. And it's not just that inflation story," Jack Manley, global market strategist at JPMorgan Asset Management, told Yahoo Finance Live. "We have still some uncertainty, some lack of clarity around what the Fed is going to do. The war in Europe continues to rage. And we know there are new developments happening on that front every few days."

"There's a lot to digest right now. And without any sort of real clarity on these things, it's hard for markets to meaningfully move higher or lower," he added. "It's all markets really want at the end of the day, is news. And no news is bad news.""

MY COMMENT

Baring a miracle today....we are headed to another negative week for stocks and funds. The only good news is that we will move one week forward......closer to the end of this big mess. We will soon be half way through what has been a very volatile and steadily negative year.

The BIG lesson this year......RISK matters. People that went way out on a limb and invested in very risky investments and/or in a very risky fashion are paying a very big price.

 

I see that Bitcoin earlier today was below $30,000 again. It is a tough time for those that believe in Crypto to the point that they have adopted it as their primary asset. Good luck to those that have decided to take their salary in Crypto.

I personally dont see it as an investment....but....to each their own. If anyone on here is a Crypto fan.....feel free to give us opinions and updates on the topic any time. My knowledge on this topic is very slim.

 

Are we in a recession? Probably. People just dont know it yet.

Dow futures slide 250 points after May inflation report is worse than feared

https://www.cnbc.com/2022/06/09/stock-market-news-open-to-close.html

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

"Stock futures dropped on Friday morning after a highly anticipated inflation report showed a faster-than-expected rise in prices.

Futures tied to the Dow Jones Industrial Average shed 279 points, or 0.9%. Those for the S&P 500 fell 1.1%, while Nasdaq 100 futures sank 1.4%.

The May consumer price index report came in hotter than expected, putting pressure on the stock market. The report showed prices rising 8.6% year over year, and 6% when excluding food and energy prices. Economists surveyed by Dow Jones were expecting year over year increases of 8.3% for the main index and 5.9% for the core index.

“It’s confirming some of the fears I’ve been hearing from investors this week,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. She said inflation fears have been driving stocks lower this week.

“Does it sort of force equities to stay at stay at the bottom the range it’s been in? perhaps. I don’t think this is enough to force it down to new lows,” Calvasina added.

The move in futures comes after stocks fell sharply during Thursday’s regular session, with the S&P 500 and Nasdaq Composite each falling more than 2%. The Dow closed down more than 600 points, losing roughly 400 points during a rough final hour of trading on Wall Street.

For the week so far, the Dow is lower by 1.9%, on track for its 10th down week in the past 11. The S&P 500 and Nasdaq Composite are both off by more than 2%, on track for their ninth losing week in 10.

“I think there’s still a pretty high degree of pessimism that helps underpin the market, and the back-and-forth action is really the market trying to make sense of the next direction and waiting for news flow,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

Later on Friday, a preliminary consumer sentiment reading for June is due out after the stock market opens."

MY COMMENT

The market direction continues to be negative with no end in sight. We are just at the beginning of this process of rate increases, gas increases......and.....whatever happens with inflation.

Hopefully this little time period will be a lesson in the future when people want to shut down the economy and give away massive amounts of free money....all at the same time.

The only question at this point is how long will all of this last and how far will stocks fall beyond where they are right now. Those questions have no answers since no one knows. Investors just have to accept the fact that there is no way to figure any of this out.....you just have to go along for the ride. IT IS WHAT IT IS.

 

Here is a little more detail.

Inflation hits 40-year high as CPI rises 8.6% in May

https://finance.yahoo.com/news/may-inflation-data-june-10-2022-212834308.html

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

"Inflation accelerated in May as U.S. consumers grapple with a surge in prices for gas, food, and shelter, data showed Friday.

The Bureau of Labor Statistics' May Consumer Price Index (CPI) reflected a year-over-year increase of 8.6% last month, up from April’s print. Consensus economists were expecting an 8.3% increase in May, according to estimates compiled by Bloomberg.

On a monthly basis, the broadest measure of inflation rose at a pace of 1.0%, compared to 0.3% in April.

Ahead of Friday’s report, experts predicted a surge in gasoline prices would prove a driver of inflation for May after a recent rise back to all-time highs. In April, a moderation in the price of energy offered a temporary relief to inflation after Russia’s invasion of Ukraine rocked global commodities markets in March."

MY COMMENT

I hate to say it......no one likes to hear some old person talking about walking ten miles to school in the snow, uphill.....but......what we are seeing now in the economy, with gas, with inflation......is NOTHING.......compared to what those of us lived through in the late 1970's early 1980's. It is also......NOTHING.....near as bad as past bear markets like the dot-com crash or others.

I think this is one reason why much of the country is so blase' about this time period right now. Many of us have lived through way worse during our adult lives.

I am STILL not seeing or feeling much in the way of fear or panic out in the real world. people are just going on with their regular lives and ignoring it all. No one seems to care.

 

See you guys after the close.

One last post....I finally found an article with more detail.

Inflation rose 8.6% in May, highest since 1981

https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html

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

"Key Points

• The consumer price index rose 8.6% in May from a year ago, the highest increase since December 1981. Core inflation excluding food and energy rose 6%. Both were higher than expected.
• Surging food, gas and energy prices all contributed to the gain, with fuel oil up 106.7% over the past year.
• The rise in inflation meant workers lost more ground in May, with real wages declining 0.6% from April and 3% on a 12-month basis.

Inflation accelerated further in May, with prices rising 8.6% from a year ago for the fastest increase since December 1981, the Bureau of Labor Statistics reported Friday.

The consumer price index, a wide-ranging measure of goods and services prices, increased even more than the 8.3% Dow Jones estimate. Excluding volatile food and energy prices, so-called core CPI was up 6%, slightly higher than the 5.9% estimate.

On a monthly basis, headline CPI was up 1% while core rose 0.6%, compared to respective estimates of 0.7% and 0.5%.

Surging shelter, gasoline and food prices all contributed to the increase.

Energy prices broadly rose 3.9% from a month ago, bringing the annual gain to 34.6%. Within the category, fuel oil posted a 16.9% monthly gain, pushing the 12-month surge to 106.7%.

Shelter costs, which account for about a one-third weighting on the CPI, rose 0.6% for the month, the fastest one-month gain since March 2004. The 5.5% 12-month gain is the most since February 1991.

Finally, food costs climbed another 1.2% in May, bringing the year-over-year gain to 10.1%.

Those escalating prices meant workers took another pay cut during the month. Real wages when accounting for inflation fell 0.6% in April, even though average hourly earnings rose 0.3%. On a 12-month basis, real average hourly earnings were down 3%.

Markets reacted negatively to the report, with stock futures indicating a sharply lower open on Wall Street and government bond yields rising.

Some of the biggest increases came in airfares (up 12.6% on the month), used cars and trucks (1.8%), and dairy products (2.9%).

Friday’s numbers dented hopes that inflation may have peaked and adds to fears that the U.S. economy is nearing a recession.

The inflation report comes with the Federal Reserve in the early stages of a rate-hiking campaign to slow growth and bring down prices. May’s report likely solidifies the likelihood of multiple 50 basis point interest rate increases ahead.

With 75 basis points of interest rate rises already under its belt, markets widely expect the Fed to continue tightening policy through the year and possibly into 2023. The central bank’s benchmark short-term borrowing rate is currently anchored around 0.75% -1% and is expected to rise to 2.75%-3% by the end of the year, according to CME Group estimates.

Inflation has been a political headache for the White House and President Joe Biden.

Administration officials pin most of the blame for the surge on supply chain issues related to the Covid pandemic, imbalances created by outsized demand for goods over services, and the Russian attack on Ukraine.

In a recent Wall Street Journal op-ed, Biden said he will push for further improvements to supply chains and continue efforts to bring down the budget deficit.

However, he and Treasury Secretary Janet Yellen both have emphasized that much of the responsibility for lowering inflation belongs to the Fed. The administration has largely denied that the trillions of dollars directed toward Covid aid played a major role.

How much the central bank will have to raise rates remains to be seen. Former Treasury Secretary Larry Summers recently released a white paper with a team of other economists that suggests the Fed will need to go further than many are anticipating. The paper asserts that the current inflation predicament is closer to the 1980s situation than it appears because of differences in the ways that CPI is computed then and now."

MY COMMENT

NO COMMENT.............I got nothin'.

 

Well that was a hot day today......at the show......not in the markets. It got up to 106 degrees this afternoon.

The markets......not so hot......I was definately in the red......and.....got beat by the SP500 by 0.90%.

What is insane right now is the fact that I own 10 of the greatest companies in the world.....all of them make buckets of money........ enough money that they have ZERO requirement to borrow to do business......yet we constantly hear how the rise in the Ten Year Yield is so critical to them. RIDICULOUS.

We end yet another week.....and move forward.......to FED rate raising week.

 

Read'em and weep.

DOW year to date (-13.61%)
DOW for the week (-4.58%)

SP500 year to date (-18.16%)
SP500 for the week (-5.05%)

NASDAQ 100 year to date (-27.50%)
NASDAQ 100 for the week (-5.70%)

NASDAQ year to date (-27.52%)
NASDAQ for the week (-5.60%)

RUSSELL year to date (-19.82%)
RUSSELL for the week (-4.40%)

Look at those HUGE losses for the week......just one week. TGIF.

If we are lucky the fact that EVERYONE in the world knows that we are going to get a 0.50% raise next week......will help us a little. Perhaps things will settle down a little......after the next couple of FED rate increases and after the next quarter GDP number comes out. In other words......in a couple of months.

I would put the possible down side to the markets right now at another......10% to 25%. Not that we will get that far down. Time will tell.

 

NOW......for some good news.

Tesla announces 3-for-1 stock split, Ellison to leave company's board

https://finance.yahoo.com/news/tesla-stock-split-june-2022-212130185.html

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

"Tesla (TSLA) announced in its annual proxy statement released late Friday it will seek shareholder approval to split its stock 3-for-1.

Shareholders will vote on the proposal at Tesla's annual meeting on August 4th.

Tesla shares rose as much as 3% after hours on Friday following the news; shares fell 3.1% during Friday's regular trading session. Tesla shares have dropped 34% so far this year.

In its filing, Tesla said the proposed stock split, "would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value. In addition, as retail investors have expressed a high level of interest in investing in our stock, we believe the Stock Split will also make our common stock more accessible to our retail shareholders."

Tesla says the 3-for-1 stock split would be executed via a special dividend given to investors.

Back in March Tesla had said it would ask for authorization of the stock split at its annual meeting; now, the company is disclosing how that split will go down.

This marks the company's second stock split in less than two years — in August 2020, Tesla split its stock 4-for-1.

Separately, the company revealed Larry Ellison, executive chairman of Oracle (ORCL) and a member of Tesla's board, would be stepping down. Ellison joined the company's board in 2018, a move that followed Ellison disclosing a stake in the company. Tesla's board will go down to 7 members from 8 after Ellison departs."

MY COMMENT

This might help the stock a bit going forward.

We also have Google doing a split in mid July.

 

YEP.....in the modern society everything moves quicker.

Everything in the Stock Market Is Being Sped Up Including the Crash

https://finance.yahoo.com/news/everything-stock-market-being-sped-150531388.html

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

"(Bloomberg) -- When the nineties ended, an overvalued stock market took three long years to rid itself of its accumulated excess in what is now known as the dot-com crash.

That a similar reckoning has needed just 14 months to play out now is a sign of how fast moving this market is -- and how dangerous it’s become for anyone believing they can pick a moment to buy and sell.

The perils were on full display Friday as a hot inflation reading jolted financial markets, shaking the S&P 500 out of a range it had settled into this month. Investors who had seen the index rally 9% since it nearly tipped into a bear market May 20 were blindsided by the latest bout of selling.

Persistent inflation is only the latest threat to a market pounded by a flurry of macro blows. Trying to figure out which matters most has become something of a fool’s errand. That’s essentially the view of Eric Schoenstein, co-manager of the $9.7 billion Jensen Quality Growth Fund (ticker JENSX), which according to Bloomberg data has beaten 96% of peers in the past year. With inflation, the Federal Reserve, a pandemic and war bearing down on investor psyches, the only safe bet at this point is that equity volatility will continue.

“It just feels like there’s nothing that you could point to and say, ‘that’s the reason, and if we get this piece cleared up, everything will pass and we can move on to the next iteration,’” Schoenstein said by phone. “With all of that uncertainty, the market is going to pull back, and investors, frankly, are probably in a mode where they’re doing a bit more indiscriminate selling.”

The S&P 500 tumbled more than 2.5% as of 11:05 a.m. in New York Friday, as unexpectedly hot consumer-prices fueled bets the central bank will have to toughen its battle against inflation. Down almost 5% over five days, the index is on course for its worst week since January.

That tendency to sell whatever you can has contributed to an epic drop in valuations. After peaking above 30 times earnings a year ago, the S&P 500’s multiple shrunk by roughly 40% through its trough in May -- almost matching the size of the contraction during the entire 2000-2002 crash.

In other words, the correction to valuations is happening three times faster than the bursting of the internet bubble.

To Bloomberg Intelligence’s Gina Martin Adams, the accelerated drawdown reflects how much the post-pandemic equity rally relied upon the Fed. Once the central bank turned hawkish, the unwinding was vicious.

“When easy money disappears, the bubble disappears,” Martin Adams said. “The foundation of the bubble in the 1990s was market psychology about growth prospects and equity ownership. It was harder to deflate.”

Thanks to solid earnings, the meltdown in P/E has done less damage to the market on the price level. Still, down 19% from its January peak to the May bottom, the S&P 500 just endured its third retrenchment of at least that magnitude in four years. Such oft-repeated turbulence had never happened since at least 1950, according to Leuthold Group.

Underpinning the extreme recurrence of equity turmoil is an unusually volatile economic and policy backdrop. After sinking into a recession during the pandemic, the US is now booming after unprecedented government and central bank stimulus. The Fed, which spent most of the past decade fighting deflation, is battling the fastest inflation in four decades.

To the delight of the bulls, the first two losses, one in late 2018 and the other in early 2020, were all but erased in a matter of months. While stocks have yet to recover from their 2022 slide, anyone who had bought shares four years ago and stayed invested would have since enjoyed an annualized return of 12%.

“The fact the S&P 500 has somehow delivered solid results during four years of incredible volatility and uncertainty is fascinating,” Jim Paulsen, chief investment strategist at Leuthold, wrote in a recent note. “Often, the stock market ‘returns’ while most are waiting for the dust to settle. Volatility and uncertainty can be signs of trouble ahead, but they also frequently signal great opportunities.”

But one big difference now is the Fed’s stance. Unlike in 2018 and 2020, when the central bank quickly came to the rescue, such safety net no longer exists with policy makers laser-focused on taming inflation.

Conflicting narratives abound. While recession talk is building, economic data and corporate earnings continue to point to a healthy business cycle.

Schoenstein at Jensen says he refrains from predicting where equities are heading. Rather than timing the market, he says, investors should focus on picking stocks that will be able to endure any prolonged economic troubles.

His firm has taken advantage of this year’s selloff to add to holdings of stable growers, such as insurance broker Marsh & McLennan Co. and Moody’s Corp., a credit-rating company.

“When you do that individually, company by company, in a high conviction manner, you don’t spend as much time trying to figure out ‘is the market at the bottom, is the market at the top, or is the market going to turn around?’” Schoenstein said. “That will give you more ability to sort of sleep at night.”"

MY COMMENT

Sounds about right to me. Other than the negative leanings.....this current short term market is totally opaque. it is a MESS.

Nothing I can do about it.....so I dont even try. I just count off the weeks and wait.

 

House hunters......might be seeing some good news in housing prices in some local areas. BUT.....they are caught up in the push pull of prices going down some versus mortgage rates quickly going up.

Home prices have begun falling in these 10 cities, according to Realtor.com
The housing boom may be leveling out as higher prices push some buyers out of the market

https://www.foxbusiness.com/personal-finance/home-prices-falling-10-real-estate-markets

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

"While low housing inventory continues to pose a problem for homebuyers, rising mortgage interest rates appear to be dampening demand and leveling out home prices in select regional markets, according to a new report from Realtor.com.

"Many would-be buyers are being priced out of homeownership as higher mortgage rates mean more expensive monthly housing payments," the report reads. "But when there are fewer buyers competing for homes and bidding them up, prices typically go down."

Still, these smaller price decreases "don't portend another crash" like the 2008 housing bubble that spurred the Great Recession. Some of these dips can be attributed to fewer larger homes on the market and an increase in new listings.

To determine where asking prices are trending down the most, Realtor.com analyzed the annual median list price changes in the 100 largest metros in March. Then, they narrowed down their list to just once city per state. Keep reading to find out where today's homebuyers can lock in a good deal, and visit Credible to compare mortgage rates for free without impacting your credit score.

Where home listing prices fell the most in March

Realtor.com found that housing prices have begun falling in many smaller Rust Belt cities, as well as some of the largest metro areas in the country. Here are the median listing prices in the top 10 cities in the study, as well as the year-over-year price change:

1. Toledo, Ohio: $115,000 (-18.7%)
2. Rochester, N.Y.: $149,000 (-17%)
3. Detroit: $75,000 (-15.4%)
4. Pittsburgh: $230,000 (-13.7%)
5. Springfield, Mass: $239,900 (-5.8%)
6. Tulsa, Okla.: $220,000 (-5%)
7. Los Angeles: $985,000 (-5%)
8. Memphis, Tenn.: $173,500 (-4.6%)
9. Chicago: $399,000 (-3.7%)
10. Richmond, Va.: $310,000 (-3.4%)

Low inventory and rapid home price growth have caused residents of some cities to become priced out of their own real estate markets. George Ratiu, an economist at Realtor.com, said that several of the metros with falling home prices have unemployment rates that are well above the national average.

Buyers in these markets "may face steeper affordability challenges from rising mortgage rates" despite lower prices, Raitu said. The average 30-year mortgage rate surpassed 5% in March for the first time since 2018, which has caused monthly mortgage payments to soar among new borrowers in 2022 so far."

MY COMMENT

Mixed news above regarding houses and buying. At least qualified buyers that have the assets to buy and deal with higher mortgage rates.....MIGHT.....be seeing some price reductions....in select cities. All in all STILL a very difficult environment for home buyers.

 

The fun of Bear Markets.

How bear markets trick gullible investors

https://www.marketwatch.com/story/how-bear-markets-trick-gullible-investors-11654880407

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

"Bear markets like to trick you into thinking they have come to an end.

They do that by mounting explosive one-day rallies. Those jumps more often than not turn out to be traps that lure the gullible back into the market just as it’s about to turn down again. Bear markets constantly are playing Lucy to investors’ Charlie Brown, promising not to yank the football away just when you’re about to kick it—and then doing exactly that.

This buy-high sell-low behavior is why many investors perform even worse than index funds during major declines. Today, given that the major market averages are in danger of slipping into official bear-market territory, it’s more important than ever to understand this mischievous behavior from Mr. Market.

Consider the 100 best one-day rallies mounted by the S&P 500 SPX, -2.91% since 1928. You would be excused for thinking that such rallies are most likely to occur during bull markets. Alternately, you might believe that such rallies occur randomly across both bull and bear markets alike. The last thing you’d suspect is that these big one-day rallies are more likely to occur during bear markets.


Yet that’s precisely the case.

To appreciate what my analysis found, bear in mind that 30.3% of the trading days since 1928 have occurred during a bear market in the calendar maintained by Ned Davis Research. So if the 100 best one-day rallies were more likely to occur during bull markets, you’d expect fewer than 30 of them to occur when the major trend was down. In fact, however, 58 of those 100 biggest one-day rallies occurred during bear markets, as you can see from the accompanying chart. In other words, the probability that a big one-day rally occurs during a bear market is nearly twice as high as you’d expect on the basis of randomness.


Furthermore, as the chart also shows, the probability of a big daily jump occurring during a bear market is almost as high as the probability of a big daily plunge.

Nasdaq

I was prompted to conduct this analysis by a fascinating report from Cornell Capital into the bear market concentration of the biggest rallies in the Nasdaq Composite index COMP, -3.52%. That concentration is even more pronounced than it is for the S&P 500.

What Cornell Capital did was focus on just the last three bear markets: The 2000-2002 bursting of the Internet bubble, the 2007-2009 global financial crisis, and the bear market in early 2020 that accompanied the onset of the COVID-19 pandemic. Of all trading days since the Nasdaq Composite index was created in 1971, just 7.8% took place during one of these three bear markets.

Nevertheless, an incredible 80% of the forty biggest one-day rallies in the Nasdaq Composite occurred during one of these three bear markets. That’s nearly 10 times the percentage you’d expect if those rallies occurred randomly.


The investment implication? Big daily rallies stock market often don’t mean what you think they do. So don’t base any major changes in your portfolio on those rallies."

MY COMMENT

I am not making any moves at the moment since I continue to be fully invested all the time. BUT.....if I was not fully invested....I would not be making big bold moves at the moment. If I had extra funds I would be happy to put it to work in the markets at these down prices......but NOT based on expectation that we were at a bottom based on some one day or one week rally.

 

You are so right Zukodany.

It is a test. We will know when it is over when the majority of the new investors have BOLTED out of panic....and.....we are being told that the new normal is that stocks are no longer worth investing in. In other words....classic capitulation. We are not there yet. We need to see a lot more fear, panic, drama, and crying.

It will be a step in the right direction when the general economy goes into recession. I think it should be this year, perhaps in a few months.

I am getting the feeling that many small businesses are on the edge of failure right now. Many of the mom and pop restaurants and businesses that we go to are definitely at risk of failure. Many of them have raised their prices significantly.....and I notice at the same time a significant loss of business compared to normal. I think they have reached the limit of how much they can raise prices without losing enough of their customers that they will go under. Of course the conundrum is that if they can not raise prices......they will ALSO go under. Not a pretty place to be in as a small business owner.......they are kind of screwed either way. We always try to support the local small businesses.

 

It is times like this that make me extremely happy that I made the choice to secure my lifetime retirement with my income annuities and NOT depend on stock market money for retirement.

If I was the typical baby boomer with IRA or 401K based retirement.......that I was counting on to support me and or my wife for potentially another 25 years........and I was counting on stock market gains to maintain those funds......I would be freaking out. It is not a good thing to enter retirement and see 20-50% of your money disappear in one or two or three years.

Of course after losing 15% or 20% or 25%....you can always sell out of the markets. BUT.....than you are playing the losing game of trying to figure out when and how much to put back in.....and.......will be second guessing yourself forever.

When I started in retirement in 1999.....I decided to maintain 5 years of living money outside the markets in liquid form. I would replenish my 5 years worth of cash equivalent any time there was a strong market rally or a new high.

Luckily I was doing this when the dot-com crash hit. It gave us enough of a cushion to weather that event at the start of retirement and not have to take the rest of our money out of the market. I severely DOUBT that most people are keeping 5 years worth of money safe. I would guess that many think they can get by with about 1.5 to 3 years of safe living money.

What people will find out is that it is not about just getting through some rough time in the markets......it is also about getting past that time by 2-3 years.......so you have enough time to have your funds build back during 2-3 good market years that follow the bad.

Lets say this time period we are in right now is the start of a 2-3 year Bear Market that ends up with the markets down by 30% to 40%. If you ONLY were keeping 3 years of cash money to live on.......you are going to have to pull money out of your account in year 4 and year 5.....BEFORE.....your account has a chance to recover much. This is how you end up being in the hole by 50% to 60% on your retirement money in just a span of about 5 years.

The current environment is also a good lesson for those nearing retirement regarding DEBT. I would not want to be in retirement with car payments, a house payment, credit card debt, etc, etc, etc. Not if I was responsible for my own retirement. DEBT just ramps up the pressure when you are not working a job and are in the draw-down phase of retirement accounts.

For non-government workers that have NO PENSION........if you are more than 10 years from retirement.....you might want to do some long term planing and thinking about these sorts of issues now....while you still have time to set up a solid strategy....taking into account the worst case scenario.

In other words......as any good business person does.....plan for the best and plan for the worst.....and.....be extremely clinical and realistic in the data and numbers you use.