According to Bernstein analyst Ann Larson, the bear market has more room to operate. So far, the U.S. stock market downturn has lasted nine months and there have been four bear market rallies, the company pointed out in a note Tuesday. While the summer bull run left some wondering if a bailout was possible, stocks fell on Tuesday, experiencing their worst day since June 2020 after inflation numbers picked up. higher than expected. The S&P 500 index, which hit a low of 3,636.87 on June 17, is still down more than 17% year-on-year. There are three main reasons for more pain ahead, says Larson. To make her point, she analyzed the sell-off of the past 85 years. First, most major global recessions end in moderate inflation/low growth regimes. In addition, the return of major global markets to the US market is increasing, which often coincides with major market pullbacks. In the end, hopes of a more agreeable Federal Reserve were dashed. “Powell’s speech at Jackson Hole and the most recent CPI print could indicate that the Fed glitch is off the table soon, leaving markets more vulnerable to rate hikes and concerns about growth,” wrote Larson. Bernstein has studied bear markets dating back to 1937. It loosely defines bear markets, with sell-offs of 15% to 20% instead of the traditional 20%, so that it can study more periods. . In addition to the 28% average drop, it shows that recessions last an average of seven months, with an average of three bear market rallies. The longest bear market lasted 25 months during the dotcom recession earlier this century, and there were eight rallies. The shortest recessions were during recessions triggered by the Iranian revolution and former Fed Chairman Paul Volcker’s inflation war in the early 1980s and Covid in 2020, both of which lasted only two years. month. That said, there are a few reasons to be optimistic, Larson said. If the U.S. is at or near peak inflation, she noted, that has led to positive S&P 500 returns over the past 12 months. “Additionally, consumer sentiment is currently at a lower level than we have seen even during the global financial crisis, and consumer sentiment bottoming out in the past has pushed buying opportunities past. a year,” Larson said. However, a recession could further complicate matters. Since 1955, the S&P 500 has fallen 13% as leading economic indicators point to the current recession, she said. Since 2000, the average reduction has been 35%. – Michael Bloom of CNBC contributed reporting.
