Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Are We Entering a Stocks Bear Market?

Stock-Markets / Stock Markets 2018 Nov 09, 2018 - 02:07 PM GMT

By: John_Mauldin


I’ve gotten a lot of questions lately about whether I think we are entering into a bear market. The honest answer is I don’t know.
First, looking back in history, there are two types of bear markets:

  1. those that happen in a recession,
  2. and those that don’t.

Bear markets that happen in a recession are often deeper and the recovery is much longer. Those that happen simply because the market had gone “too far, too fast” tend to be “V”-shaped recoveries. Think 1987 or 1998.

Looking at the economy today, there is no true reason for a long-term bear market. The economy is in relatively good shape. And I don’t see a reason for a recession to begin anytime soon, absent some trigger event from Italy/Europe or China, or some Black Swan.

That means if we did have a bear market correction, I would actually expect it to be “V”-shaped and a very tradable exercise.

A “Sector Rotation” Market

On the other hand, the market itself is showing signs of weakness.

My friend Dave Wright points out that even during the large upward movement on Monday, the stocks on the NYSE made more new lows than they made new highs. That is not a healthy market.

All that being said, much of the correction came in the tech sector, especially the S&P. Had you taken the technology stocks out of the S&P 500, we would’ve been in a downward market for quite some time. Technology clearly has led the way in recent times.

It is very possible that we get into a “sector rotation” market and that we churn sideways for quite some time.

It is just as possible that we see what normally bearish David Tice thinks will happen: that we are actually in danger of a market melt-up, which can happen for all manner of reasons.

Let me give you a potential.

Right now, the market and most commentators believe that Democrats will take the House in the midterm elections.

What happens if they don’t? Could we see the same type of bullishness in the markets and sentiment that developed after Trump was elected?

I know my Democratic friends want to ignore it, but so many sentiment indicators are at all-time highs. And they’ve been that way since Trump was elected.

Don’t ask me to tell you the reason or discuss politics with you, I’m simply looking at the facts. And I think we all agree that sentiment does drive markets.

But we need to remember that sentiment can turn on a dime.

My Advice for You

Now let me give you some really good advice that I am confident will make you a better investor.

One of the greatest investors of our times is Howard Marks of Oaktree Capital. He manages $122 billion and his quarterly letters are must-read. They are full of wisdom and insight.

He is one of my investment and thought heroes.

He has written a brilliant and extremely readable book called Mastering the Market Cycle: Getting the Odds on Your Side.

In interviews and other places, he basically says he thinks that 2018 is much like 2006. As he says, “Where we are in the market cycle shapes the probability distribution of returns that you face, and so it’s worth trying to figure out where we are.”

This is from a man who wrote his famous memo, “Race to the Bottom,” in 2007.

Whether you are a professional investment advisor or an individual investor, you really should get the book. It may very well be the most important thing you do for your investment portfolios this year.

I can’t say it any stronger than that. Other than to say, I wish I had written the book.

Join hundreds of thousands of other readers of Thoughts from the Frontline

Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.
John Mauldin Archive

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in