Bear market story playing out beneath the surface.
Contrarian play is in bonds not stocks.
Challenges ahead, but commodity trends remain robust.
Friday’s mid-day swoon saw the S&P 500 move to new lows for the year and for a time had the index more than 20% below its January peak. By the end of the day, however, those losses were recovered. The index finished up on the day and closed at “only” 18.7% below its all-time high. Friday’s final hour surge was not enough to keep the index from falling for the seventh week in a row.
While these swings might pose a dilemma if you insist on seeing a 20% decline to slap a bear market label on the current environment, such is not our concern. I look around and see that it has been six months (and counting) since we last had more new highs than new lows and in the past two weeks more than 50% of the stocks on the NYSE+NASDAQ have made new 52-week lows (versus just 5% that have made new highs). Bear market behavior has been playing out beneath the surface for months now. The indexes, and headline writers that watch them, are just catching on.
