Is A Bear Market Straight Ahead?
Canada dives into tyranny. War could erupt in Europe. We have the worst president in over 100 years. Inflation is biting. What else could go wrong?
How about a bear market? This generation has no idea what that is, but they are about to find out the hard way.
The DJIA lost 482 points today to close at 33,596.61. This is now 17.3% lower than its high of 36,952.65 set on January 3. The worst January since the Great Depression may soon give way to the worst February as well.
The Russell 2000 is in worse shape, down over 20% from its high of 2,458 on November 5. This is in bear market territory!
One big shock - like war in Ukraine - could send all equities down more than 10-15% in a single day, throwing everything into a bear market. That's where margin calls start forcing more sales to cover loans made to buy stocks at higher levels.
This is shaping up to look like the bear market of 1973-1974, in which US stock indexes lost 45% of value in 24 months. The UK lost 73%! Given the excesses of the recent markets, there is no reason to think this one could not lose a lot more than 45%. Let’s hope not.
Time to buckle up.