Bear Market: The Average U.S. Stock Is Already Down More Than 20 Percent
Submitted by Michael Snyder via The Economic Collapse blog,
The stock market is in far worse shape than we are being told. As you will see in this article, the average U.S. stock is already down more than 20 percent from the peak of the market. But of course the major indexes are not down nearly that much. As the week begins, the S&P 500 is down 9.8 percent from its 2015 peak, the Dow Jones Industrial Average is down 10.7 percent from its 2015 peak, and the Nasdaq is down 11.0 percent from its 2015 peak. So if you only look at those indexes, you would think that we are only about halfway to bear market territory.
Unfortunately, a few high flying stocks such as Facebook, Amazon, Netflix and Google have been masking a much deeper decline for the rest of the market. When the market closed on Friday, 229 of the stocks on the S&P 500 were down at least 20 percent from their 52 week highs, and when you look at indexes that are even broader things are even worse.
For example, let’s take a look at the Standard & Poor’s 1500 index. According to the Bespoke Investment Group, the average stock on that index is down a staggering 26.9 percent from the peak of the market…
Indeed, the Standard & Poor’s 1500 index – a broad basket of large, mid and small company stocks – shows that the average stock’s distance from its 52-week high is 26.9%, according to stats compiled by Bespoke Investment Group through Friday’s close.
“That’s bear market territory!” says Paul Hickey, co-founder of Bespoke Investment Group, the firm that provided USA TODAY with the gloomy price data.
So if the average stock has fallen 26.9 percent, what kind of market are we in?
To me, that is definitely bear market territory.
The rapid decline of the markets last week got the attention of the entire world, but of course this current financial crisis did not begin last week. These stocks have been falling since the middle part of last year. And what Bespoke Investment Group discovered is that small cap stocks have been hurt the most by this current downturn…
Here’s a statistical damage assessment, provided by Bespoke Investment Group, of the pain being felt by the average U.S. stock in the S&P 1500 index:
* Large-company stocks in the S&P 500 index are down 22.6%, on average, from peaks hit in the past 12 months.
* Mid-sized stocks in the S&P 400 index are sporting an average decline of 26.5% since hitting 52-week highs.
* Small stocks in the S&P 600 index are the farthest distance away from their recent peaks. The average small-cap name is 30.7% below its high in the past year.
After looking at those numbers, is there anyone out there that still wants to try to claim that “nothing is happening”?
Over the past six months or so, the sector that has been hit the hardest has been energy. According to CNN, the average energy stock has now fallen 52 percent…
And then there’s energy. The dramatic decline in crude oil prices rocked the energy space. The average energy stock is now down a whopping 52% from its 52-week high, according to Bespoke. The only thing worse than that is small-cap energy, which is down 61%.
If you go up to an energy executive and try to tell him that “nothing is happening”, you might just get punched in the face.
And it is very important to keep in mind that stocks still have a tremendous distance to fall. They are still massively overvalued by historical standards, and this is something that I have covered repeatedly on my website in recent months.
So how far could they ultimately fall?
Well, Dr. John Hussman is convinced that we could eventually see total losses in the 40 to 55 percent range…
I remain convinced that the U.S. financial markets, particularly equities and low-grade debt, are in a late-stage top formation of the third speculative bubble in 15 years.
On the basis of the valuation measures most strongly correlated with subsequent market returns (and that havefully retained that correlation even across recent market cycles), current extremes imply 40-55% market losses over the completion of the current market cycle, with zero nominal and negative real total returns for the S&P 500 on a 10-to-12-year horizon.
These are not worst-case scenarios, but run-of-the-mill expectations.
If the market does fall about 40 percent, that will just bring us into the range of what is considered to be historically “normal”. If some sort of major disaster or emergency were to strike, that could potentially push the market down much, much farther.
And with each passing day, we get even more numbers which seem to indicate that we are entering a very, very deep global recession.
For instance, global trade numbers are absolutely collapsing. This is a point that Raoul Pal hammered home during an interview with CNBC just the other day…
Looking at International Monetary Fund data, “the year-over-year change in global exports is at the second lowest level since 1958,” Raoul Pal, Publisher of the Global Macro Investor told CNBC’s”Fast Money”this week.
Basically, it means economies around the world are shipping their goods at near historically low levels. “Something massive is going on in the global economy and people are missing it,” Pal added.
The steep decline in 2015 exports is second only to 2009, when the global recession led to a 37 percent drop in export growth.
We have never seen global exports collapse this much outside of a recession.
Clearly we are witnessing a tremendous shift, and it boggles my mind that more people cannot see it.
As for this current wave of financial turmoil, it is hard to say how long it will last. As I write this article, markets all over the Middle East are imploding, stocks in Asia are going crazy, currencies are crashing, and carry trades are being unwound at a staggering pace. But at some point we should expect the level of panic to subside a bit.
If things do temporarily calm down, don’t let that fool you. Global financial markets have not been this fragile since 2008. Any sort of a trigger event is going to cause stocks all over the world to slide even more.
And let us not minimize the damage that has already been done one bit. As you just read, the average stock on the Standard & Poor’s 1500 index is already down 26.9 percent. The financial crisis that erupted during the second half of 2015 has already resulted in trillions of dollars of wealth being wiped out.
When people ask me when the “next financial crisis” is coming, I have a very simple answer for them.
The next financial crisis is not coming.
The next financial crisis is already here.
An angry bear has been released after nearly seven years in hibernation, and the entire world is going to be absolutely shocked by what happens next.
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Big Bear Song: https://www.youtube.com/watch?v=nMIkpFwGG9Q
I see black helicopters coming... no wait! They're green helicopters!
Should we wear our Dow(n) 16k hats backwards on the descent?
pods
I like when market goes down on me. Feels good to short it.
Look for Bernanke's ghost in the sky. If you see it the helicopters are on their way.
The bear market is fiine! It's fiiiine!
Mr Banzai may want to consider a "work over" on the California State Flag by:
1) Putting the bear's tail between the bear's legs and lowering the head to a slink, even perhaps slinking off one side of the flag.
2) Replacing "California Republic" with "Faith In The System" or "Doing God's Work"
3) Those "green shoots" under the bear could be replaced by:
• heaps of steaming dung
• piles of shreded FRN
• piles of rubble of Doric columns (a la Wall Street façade)
4) A tiny crashed green helicopter with Ben-Janet bruised and bleeding in the pilot's seat would be cute.
AMERICA! Jesus' Favorite Country! ©®
DOW INDUSTRIALS! Jesus' Favorite Composite Index! ©®
VRX is down almost half that just today. Ackman is killing it this year, again. Sequoia has been sued over their stake, wonder if Ackman is next.
https://finance.yahoo.com/news/sequoia-fund-sued-over-big-183512263.html
Just get some DWTI, its doubled since 1/4/16
FED'S LOCKHART SAYS MARCH FOMC IS A `LIVE MEETING'
trial balloon for emergency rate cut coming in the next few months has just been sent-up
LOL not enough "Fresh" data on inflation by March to warrant a rate hike
http://www.lse.co.uk/ukMoneyNews.asp?code=6xvskznb&headline=Probably_not...
How can they cut rates if they never raised them?
indeed. all that really changed is the fed doubled the interest it paid banks to keep the excess reserves the fed gave them in the fed rather than loaning it.
and cutting rates/qe doesn't help the stock market once investors regard cash as a desirable asset.
see this week's john hussman for a particularly insightful view.
On average, this is a rout
It's way too much to bear.
we need more bear!
The bear that defecated in the woods and nobody, NOT a single soul took notice. Did it really happen? What does it matter???
This bear market is getting way too much publicity...
Right. Methinks though dost protest....
Armstrong has his followers bracing for a possible "slingshot" effect to new highs.
Then all hell breaks loose.
I'm going long oil and short the vix today, with tight stops.. My chart analysis is showing a nice controled sell off here with no chaos or panic.. Watch for a bounce back short killing rally soon on oil and these POS markets..
I mentioned DWTI up above, up $48 +20% It's the Triple Inverse Crude ETF, under $100 on 11/3/2015. I'm mentioning it to you because I too would be going long crude here, and when people start bragging about something like DWTI the ride is usually over. These Inverse Leveraged ETFs are a wonder to behold on the first day of a reversal- they cut like a double-edged sword. If there's a rally tomw in crude, please take a look at DWTI. You can look at TVIX today, going great guns in the late morning, then giving it all back plus some by the end. TVIX had a range today of more than 25% top-to-bottom, and that's only a 2x! I sold mine at $9.50 on the way up and bought the Q's, I was hurting for a few hours but all's well that ends well. Good luck to you!
this stock market is no longer "investment" .. it's become outright speculation.
Does a bear shit in the green shoots?
Does a bear need an EPA permit to shit in the green shoots?
Not if it's a badger
Taking them out behind the woodshed one by one and shooting them.
Then, all of a sudden, the rest will follow.
The bears are gaining money and strength by taking out the fattest of the herd on an individual basis now.
Who coulda seen this coming? SARC
Just because a few crappy companies went out of business and dragged the simple average # down, doens't mean that overall market is doing bad.
since when is a 40% haircut a normal recession retracement?
i still don't see that this is any more than an inventory recession so far and some stocks have already entered stupid territory with growing sales. it is a pickers' market, the classic description of a bear market. 8 years of new bull traders are getting smoked, however. don't feel much like geniuses anymore, do you?
rehash...nothing new...move on
and hold on w/ both arms and legs
So were still in deflation right... I don't want to buy more than one case of popcorn at a time..
If it is a bear market maybe we can zip it into a big bear suit and leave it at the Kremlin's front door.
DiCaprio's just won some award last nite for that bear movie, Revenant, was that movie supposed to be like a metaphor for the market?
Excellent movie btw....high recommended
The closeness of the symbols used to spell the words "revenant", "revenge", and even "reventure" are certainly a clue to it standing in for "the market." Hang on; life DOES imitate art!
DiCaprio's just won some award last nite for that bear movie, Revenant, was that movie supposed to be like a metaphor for the market?
An angry bear has been released after nearly seven years in hibernation, and the entire world is going to be absolutely shocked by what happens next.
Which is what?
This clown show has been going on way too long however QE has just begun. Next crisis (S&P 1400) will be met with QE4 at or around $120 billion a month just to keep this ponzi paper wealth dream alive.
Just more consolidation for those that own "the market"
“Something massive is going on in the global economy and people are missing it,” Pal added.
Some people are missing it.....the Pollyannas.
I'm not buying these numbers $SPXEW is only down 13.1% according to Stockcharts.com S&P 500 Equal Weight index. This isnt the same as the "average stock" but they should be closer than this, no?
I think this is the big Bang , their will be no more interventions as the fed, gov and everyone watching knows the fed was holding this market for to long and obomers terms up. their let all markets revert back to fair organic " peoples" markets
If .gov is stocked up, FEMA'd up, ammunition'd up, and all the shock troops have their amphetamines and attitude up, then yes, you could have a point. If not however... It's 'Inflate or Die'.
All transition phases are painful. In 1945 the US had 10% of global population and 50% of economic output, The global economy was US centric and this pattern still exists in many people's heads. Now the US has 4.4 % of global population and 22 % of economic activity (last time I looked). In global terms this is a transitional period because many countries are trying to catch up - deal with it.
I wonder how the three headed Cerberus talks amongst its three heads :
Yellen : I can see the light at the end of the tunnel!
Lagarde : I don't know if we are in the same tunnel ! I see the real growth shrinking like the withdrawal pains of a sheikh who has met his Amazon nymphomaniacal mistress. Oil semen is now worth nothing.
Draghi : I don't have that problem. My bunga bunga "print" will phuck the Greeks. But who cares! Mutti says it will permit the Arab unwashed to become good stalagists. And that's what counts for Eurozone if Amerika goes USD ballistic... We will own the rest of the world thanks to US Hubris blowback...
Hmmm; On the Titaninc the three headed dog has three alternative views.
Who'd have thought that! We have to talk to King of Hades :Vulcan !
Your guardian DAWG seems to suffer from Schizophrenic paranoia!
Good article!!! Maybe Joe the retail investor will get a wiff before he loses 50% of money?
No charts! Must!Have!Charts! Reading makes my head hurt.
Hey who moved the 2:30 ramp to 2:00? Arent they supposed to file a 10k or something when they do that?