Using History To Decipher The Market


There is an old expression on Wall Street that goes, “The stock market is a device for transferring money from the impatient to the patient.” It seems recently that a lot of money has been transferring lately.

Markets are down considerably since the beginning of the year with the S&P, Dow Jones and Nasdaq at record lows. Many people have been asking for my opinion on why this is the case, and to keep it simple, the world is adjusting to interest rates doubling since February.

The average person thinks the market is in turmoil due to the war in Ukraine, inflation and even lingering COVID concerns. While these are certainly factors, the market always has something external it could point to as a negative. We have had wars before, we have had inflation before, we have experienced this type of economy before – but it has been several years since we have seen interest rates climb this much this fast.

Instead of looking into a crystal ball to try and determine where the market is going, let’s look at history. The stock market has never fallen more than eight weeks in a row. The record for most consecutive losing weeks is eight weeks, and that was set back in 1970 and 2001. The S&P performance in 1970 closely correlated with what is happening so far this year. In fact, the two years are acting similarly.

So far, 2022 is about an 80% match to 1970. What happened in 1970 at the mid-year point? The market fell another 10% before ultimately hitting its low. How did 1970 end? It fully recovered back to its January 1, 1970 levels. What makes this even more interesting is 1970 was also a midterm election year. No markets are identical, but this would be the optimistic way to view this current market.

Another thing to think about is the number of days it’s taken markets historically to rebound. The longest bear market was 694 days in 1973-1974, and that was a 45% decline in the S&P. The shortest was in 2020 with 33 days for a 44% market decline. As of this writing, we are 289 days into this bear market, and it’s yet to be determined how long it will last.

One of the things that I watch closely are tech companies. Because of their size and strength, tech companies lead where the market goes. They also perform better than the overall market when the market is up, and they perform worse when the market is down. Most people are familiar with the economic rule that as interest rates go up, bond values go down. What people aren’t as familiar with, as interest rates go up, tech companies go down. Like I mentioned earlier, interest rates have doubled since February, and tech companies are particularly down dramatically. That is not a surprise. When this market recovers, tech will lead the way; it’s just a matter of how many days it’s going to take until it does.

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The views stated in this article are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.


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