
Bah! Humbug!
It’s Christmas Eve and here I am writing about something that is sad.
Stocks ended sharply lower today putting key equity benchmarks on track to log their worst month and a year in a decade. The S&P 500 slipped 2.7% to end near 2,352.
It should be obvious what the causes are.
1. Trade war with China.
2. Federal Reserve interest rates have risen four times this year.
3. President Donald Trump has discussed the possibility of firing Federal Reserve Chairman Jerome Powell.
4. There is a Federal government shutdown with no solution in sight. Another such shut down could occur on March 1, 2019 when the federal debt limit will be reached.
5. Growing concerns that the economic expansion may be coming to an end.
It’s helpful to know what a “bear market” is because based on history, it looks like we could be here for a while.
The term on Wall Street is synonymous with serious, long-lasting declines in stock markets. In numeric terms, a bear market is a 20 percent or more drop from a recent peak. The S&P 500 hit that milestone on Monday, dropping 20 percent from its 52-week high.
If this bear market is anything like the last time, it could take some time to recover. Since World War II, bear markets on average have fallen 30.4 percent and have lasted 13 months, according to analysis at Goldman Sachs and CNBC. When that milestone has been hit, it took stocks an average of 21.9 months to recover.
The good news is that bear markets do not last forever. So have a happy holiday and think positive about the new year.
