Friends

 

This morning’s CPI data showed inflation year over year running at 8.3%. Ok, that’s better than last month’s 8.5% but not much. Stocks were looking to open higher before the open until this number hit. Throughout the trading session, as we have seen recently, any attempts to rally were met with selling. Apple, which has held up better than the other mega growth names finally underperformed today which could be a sign that they are finally coming for the Generals. The other disconcerting thing about today’s action is the apparent melt down in the crypto currency world. As I have mentioned, I am not qualified to comment on crypto other than to say that the collapse in the crypto world seems to be spilling over into my world of stocks and bonds. Whatever the case, the late day selloffs continue and confirm our bear market thesis.

 

By the close, the Dow Jones Industrial was down 326 points to finish the day at 31,834. The S&P 500 was down 65 points to close at 3,935. The Nasdaq Composite Index was down 373 points to close at 11,364. Gold was up $12 to trade at $1,853 per ounce, while oil was up $5.33 to trade at $105.09 per barrel WTI.

 

If you will indulge me, I would like to partake in an investment version of “This is Your Life.” Having started my career at Merrill Lynch in 1985, I have experienced nine bear markets (though not “official” I am counting what we are experiencing now as my ninth bear market). Here are the raw numbers:

 

1987- my first bear market was the crash of 87 (lucky me). Stocks fell 23% on one day, but the actual duration of that bear market was only 2 months. Headlines screamed that we would be heading into a recession, but that recession never materialized. Top to bottom stocks fell 36%. Eventually stocks moved on to new all-time highs.

 

1990- my next bear market experience was another rather short-lived event that lasted just 3 months. Stocks fell 20% and we did experience a recession that lasted 8 months. After all was said and done stocks moved on to new all-time highs.

 

1998- this was the Asian Contagion bear market. Again, stocks went down for 3 months to the tune of 22%. There was no recession and when all was said and done stocks moved on to new all-time highs.

 

2000-2002- this one was a doozy. You may remember the dot com bubble and the subsequent crash (sounds similar to today’s stay-at-home stock crash). This one lasted 31 months officially, but I would point out that we retested the lows again in March of 2003. Whatever the ruling, stocks fell 51% and the Nasdaq fell more than 80% from its all-time high. We did, indeed, have an 8-month recession tied to this collapse, but subsequently stocks moved on to new all-time highs.

 

2007-2009- the financial crisis. You all remember this one, of course. You may never forget it. Stocks fell 58% and it took 17 months to unfold. We did have a recession that lasted 18 months. It was brutal. Of course, subsequently stocks moved on to new all-time highs.

 

2011- this one was triggered by a European Debt crisis and then the downgrading of the debt of the United States by Standard & Poor’s. Stocks went down 22% and the duration was 5 months. We did not experience a recession. Subsequently stocks moved on to new all-time highs.

 

2018- man I hated this one. I remember sitting alone in my office on Christmas Eve watching stocks plummet during a holiday shortened half-day trading session. Ruined my Christmas. That was basically the culmination of the drop which lasted 3 months and saw stocks fall 20%. There was no recession associated with this downturn in stocks. Subsequently stocks moved on to new all-time highs.

 

2020- Covid. No need to say anymore. Stocks fell 35% but the collapse only lasted a month. We also had a very short-lived 2-month recession. Subsequently stocks moved on to new all-time highs.

 

2022- Now we find ourselves in another downdraft. The S&P 500 is not yet down 20% (and may or may not officially do so), although Nasdaq is closing in on being down 30% (did I mentioned the similarities to the dot com bubble bursting in 2000?). We may already be in a recession (first quarter GDP was negative and 2 negative quarters in a row is considered a recession). I don’t know how long this episode will take to play out and I also don’t know how deep the retreat in stock prices will be, but if patterns hold true, subsequently stocks will move on to new all-time highs.

 

Have a nice evening everyone.

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