We’ll keep this week’s message short, given the rundown I presented in last evening’s video.
In said video I mentioned that in all bear markets that occurred during a recession since 1927, only one didn’t see the first selloff bottom retested or blown through before it was all said and done. That one occurred in 1949, and it was a bear market (20% off of all-time highs) by merely a hair:
Again, in every other case over the past 93 years, recession bear markets were far from over after the initial decline that made the bear official.
The two analogs to today’s setup I’ve referenced most have been 1929 and the tech bubble. The first retest of the initial low occurred ~9 months later in 1929 and ~5 months later during the tech bubble.
We’re presently 5 months removed from the initial low this go-round, and the market hasn’t even begun to roll over:
2020 Recession Bear Market
With regard to the tech bubble analog, and to reiterate the present state of market internals I touched on in the video, as Schwab’s Liz Ann Saunders points out, yesterday’s action, for example, punctuated the point.
“Yesterday’s record close in interesting company … data compiled by @Bloomberg reveal that historical days when S&P 500 gained 0.28% or more while 42% or less of members were advancing, were only before & during tech bust (obviously, a small sample size)”
Now, when I say “the market” hasn’t even begun to roll over, I’m speaking of the S&P 500 Index, which currently is more concentrated in its top 5 positions than I believe it’s ever been.
Here’s the one-year chart:
Now, if the market is indeed more than, say, the top 5 weightings in a given index, well, then, things aren’t quite as robust as they might otherwise appear.
Here’s the one-year chart for the S&P 500 Equal Weight Index (i.e., each component weighed the same):
And of course nothing tells that story like a look at the year-to-date results across U.S. sectors.
Of the thirteen featured below, 7 remain in the red on the year:
Of course we should absolutely expect as much given the lousy internals I spoke about in the video.
Yes, as I continue to stress, there’s MUCH more to play out before the curtain closes on this particular episode…
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