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July 3, 2008
Grrr...
The Dow’s 20% decline on a closing basis officially marked the U.S. bear yesterday (confirmation has yet to arrive from the S&P 500, which is off 19.4% since October 9, 2007). It has been 1,443 trading sessions since the last bear market hit bottom on October 9, 2002. From intraday peak to intraday trough the 2000-2002 bear market lasted 527 sessions, during which time the S&P 500 lost a stunning 49.76% (intraday h/l). Assuming a repeat is now in the works, we are 35% of the way through the bear with another 30% in declines to go (using the S&P 500 as a guide). Incidentally, my speculation is that the current U.S. bear will last longer than the previous one, although the losses may or may not prove as severe.
While many analysts will undoubtedly be calling for a bottom at the first sign of investor ‘capitulation’ (something they have been doing in financial stocks since last August), history suggests that it will take until at least mid-2009 before any ‘bottom’ transpires. Welcome back Mr. Bear. Value investors have missed you…
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