23/06/2022
General Market: Reduce
It doesn't take an analyst to work out that we are in a bear market, the S&P 500 has dropped approximately 23% from its peak at the beginning of the year. Nor does it take an analyst to work out why, the Russia-Ukraine war has boosted inflation to its highest levels since 1990 and Central Banks are taking aggressive action to subdue it.
The real question is, where are we in the bear market? Have we just begun or are we at the bottom? Should I be selling, holding or buying? This is where we find out which analysts are worth their pay.
What have the previous bear markets looked like? If you look back to 1960 we can find 13 bear markets. Both the decline and length of these vary greatly but we find that average decline is 31% and the average length is 12 months. Considering we are only at 23% and 6 months, one would expect to see significantly more selling before the year it out.
What about the short term? We expect to see a slight recovery in the coming weeks. Sellers are fatigued and much of the major news has already been released and digested. It is likely that selling will pick back up again when companies begin issuing guidance and downgrading their earning.
While the variety of bear markets makes them inherently difficult to predict, we believe we are still on the decline (barring a near-term reprieve). Therefore we issue a reduce on the broader market.
