S&P 500 Index Reaches Bear Market on an Intra-Day Basis. While the S&P 500 Index is technically not in a bear market by the most widely used definition (20% or more decline based on closing prices), it is important to recognize that the index did fall more than 20% from its record intra-day high on September 20 through Monday’s low. Also consider that both the Nasdaq Composite and Russell 2000 Index are in bear markets and the average stock is down more than 20%, making this feel like a bear market. We are mindful that market weakness can be alarming and cause investors to question their strategy. However, we still view the fundamental foundation as supportive for recovery, including high employment, solid consumer spending, improved business investment trends and mild inflation that should result in a firm fundamental foundation for the stock market. We are reassured by the still-solid U.S. economic and profit backdrop and the fact that losses have already nearly matched the average non-recessionary bear market decline (24% since WWII). We will continue to provide as much insight as possible during this volatile period.
Strong Signs of Capitulation in Monday’s Trading. After the worst stock market decline on any Xmas Eve ever recorded, just 10% of S&P 500 stocks are now trading above their respective 200-day moving averages, an extreme reading only reached once since the financial crisis (in 2011). Meanwhile, the S&P 500 Index put/call ratio (a measure of fear expressed by the options market) registered a more negative reading than either the 2015-2016 or 2011 corrections. Of course no one can predict a market bottom with a high degree of confidence, but these signs of capitulation, consistent with prior major market lows, are an important part of the bottoming process.
- Initial Jobless Claims (Dec. 22)
- New Home Sales (MoM, Nov)
- Conference Board Consumer Confidence Index (Dec)
- Japan Jobless Rate (Nov)
- Japan Industrial Production (Preliminary, Nov)
- Japan Retail Sales (Nov)
- Wholesale Inventories (Preliminary, MoM, Nov)
- Retail Inventories (MoM, Nov)
- Pending Home Sales (MoM, Nov)
- Germany CPI Report (Preliminary, Dec)
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.
All performance referenced is historical and is no guarantee of future results.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
Index data obtained via FactSet
For Public Use – Tracking #1-805825 (Exp. 12/19)