Displaying items by tag: bear market

(New York)

Some investors may be breathing a sigh of relief this week alongside the huge rally. The massive gain of 5% earlier this week was the biggest single day gain since 2009. However, taking a broader view, such major gains have usually mean the market is in deep trouble. To give some context, every comparable rally in stocks since 1900 occurred during the bear market of 2008-2009. Overall, it was the 9th time the market reversed an intraday move of at least 1 percent this quarter. That is the most since the US downgrade in 2011.

FINSUM: In itself, we think the rally means precisely nothing for markets. Investors’ emotions are whipsawing all over the place and the market is yet to find solid footing behind any positive narrative.

(New York)

If this stat doesn’t put the current state of the market into perspective for you, nothing is likely to: the fall in shares this month has been the worst December since the Great Depression of the 1930s. Stocks have fallen 10% alone this month, a big chunk of the 16% fall since the September peak.

FINSUM: So some of the fears about the Fed have been eased today because of the NY Fed’s comments (not that those mean much), but the new fear is about the threatened government shutdown. We imagine the shutdown will work itself out, but the trade war and threat of recession loom large. It is hard to imagine any significant rally before the New Year.

(New York)

How do you know when the market is bad? When the safest stocks are also the best performing. It sounds like an old market joke, but it couldn’t be more true right now. Stocks are down around 10% this month, the worst December since the Great Depression. A good sample of these low volatility stocks can be found in Invesco’s S&P 500 Low Volatility ETF (SPLV). That ETF has fallen just 7% from the market’s September peak, while the S&P 500 has fallen 16%. Looking at correlations, the majority of stocks with the best 90-day momentum are also those with the lowest volatility.

FINSUM: The market is playing defense, and with good reason.

(New York)

Retail is in midst of its biggest selloff since the Financial Crisis. Stocks in the sector have not fallen this hard, this fast, since 2008, and that includes the 2017 panic in retail. Retail stocks had been swept up in a sort of cautious optimism this year that had allowed them to see gains. However, they have gotten caught on the wrong side of fears over the economy and trade war, falling a whopping 17% this quarter alone. The big tumble comes despite a quite bullish Christmas sales forecast.

FINSUM: Retail has a lot of problems facing it right now. Outside of the well-known threat of ecommerce, there is also rising labor costs which are pinching margins at the same time as revenue is getting tighter.

(New York)

Goldman Sachs is sending a big warning to the market, but in its own way, of course. The bank’s strategy team has just published a new note telling investors to get “defensive” given the high uncertainty surrounding the market next year. The bank is uncertain about the direction of the stocks, but is leaning towards them either rising or gaining significantly, with a middle ground seeming less likely than usual. Institutional investors are worried that a recession will arrive in 2020, and historically speaking, the market usually falls by more than 10% in the year preceding such a downturn.

FINSUM: That last point raises the interesting question of whether the recession will arrive in 2019 and this is the 10%+ downturn preceding it. That would actually be better than Goldman’s take.