When it comes to bear markets, investors might take solace from history, which implies that where there’s a beginning, there’s always an end. And according to Bank of America, investors have only got a few bear-market months left to endure after the U.S. benchmark S&P 500 SPX, -0.13 percent plummeted into the bear territory at the start of this week. And then will emerge a bull market.
Per history, B. of A. Global Investment Strategy’s senior investment strategist, Michael Hartnett, points out, that the average peak-to-trough bear-market loss is 37.3 percent over a range of 289 days. Matching that pattern would put the end of the misery on Oct. 19, 2022, which happens to be the 35th anniversary of Black Monday, as the stock-market fall of 1987 is generally known, with, again according to statistical averages, the S&P 500 likely bottoming at 3,000.
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A typical definition of a bear market describes it as a 20 percent decrease from a recent high. As of Thursday, the index was off 23.55 percent from its record close of 4,796.56 on Monday, Jan. 3, 2022. And an end often signifies a new beginning, with Bank of America noting the average bull market lasts a lot longer 64 months with a 198 percent return, “so next bull sees the S&P 500 hitting 6,000 by Feb. 28,” said Hartnett.
Tonight, having paused $OXY purchases since May 12, $BRK $BRKA $BRKB filed a Form 4 disclosing $529MM acquisition of additional 9.6MM shares, bringing stake to ~ 23% of OXY. #OOTT pic.twitter.com/XnIPtCHS8d
— Great Quarter, CFA (@greatquarter) June 23, 2022
Meanwhile, another week saw the bank’s own bull-and-bear indicator (below) fall as far as it can into a “contrarian bullish” zone.
As Hartnett points out, this indicator has previously fallen to zero in August 2002, July 2008, September 2011, September 2015, January 2016, and March 2020. Three-month returns have been high when it has previously zeroed out, save in the case of a double-dip recession like 2002 or in the event of systemic calamities, as in 2008 and 2011.
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The bank’s latest statistics show that in the most recent week, $16.6 billion was invested in equities, $18.5 billion in bonds and $50.1 billion was invested in cash. There was a record $6.6 billion influx into U.S. small-cap stocks since December 2021, a record inflow of $5.8 billion in value stocks in the United States in the previous 13 weeks, and a record $800 million influx into tech shares during the past nine weeks, according to data.
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