Does Market Volatility Mean a Bear Market Lurks?
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What is the main topic discussed in this episode?
Your Money Briefing Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. Does the current volatility on Wall Street mean a bear market isn't far behind? We'll discuss in a moment. First, these money items you should know. The Wall Street Journal's Streetwise team says this week's plummeting tech shares weren't just about Facebook and Nvidia or even self-driving cars and social media.
Does current Wall Street volatility signal a looming bear market?
Instead, the market is waking up to an even broader threat, and that's politics. It might also be sniffing another danger from economics. Streetwise reporter James McIntosh says the arguments about who, what, when, where and why are far from being resolved. But Facebook highlights the forces gathering against tech investors. Disruptive companies are bound to make powerful enemies in old industries. But the Streetwise team says the tech companies have alienated many natural supporters among the wider public through their swagger, wealth and tax avoidance. And the Journal's MoneyBeat team says the resurgence in market volatility has shaken conviction in the aging stock bull market.
What political and economic forces did Streetwise identify behind recent tech sell-offs?
A survey released this week by the Conference Board shows 35% of consumers surveyed expect stocks to rise over the next year, but that's down from 40% last month, marking the lowest level since the November 2016 U.S. presidential election. At the same time, the percentage of people expecting stocks to fall has risen to 29% after falling below 20% in recent months. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. No one wants to overstay their welcome, and that's the feeling some investors on Wall Street have in the face of the current nine-year bull market. And the recent dramatic swings have them wondering if a bear market is lurking and if it's time to pack it in.
Wall Street Journal reporter Ajalyn Loder joins us to discuss. So, Ajalyn, a lot of this comes down to these recent gyrations, and it has investors bracing for a more dramatic drop, almost how tremors might portend a more severe earthquake.
Yes. And of course, despite a long history of failure, everyone wants to try to time the market. And recently, Bank of America came up with a set of 19 different metrics. They went through dozens, and they found 19 that generally presage a market downturn. And what they did is they made a composite of those 19 different factors. And when it's 80% triggered, they find that bear market is not that far away. And right now, we're at 68%.
So the 80% of those market indicators that have been met in the past have come around some milestone events, things like Black Monday in 1987, things like Iraq's invasion of Kuwait in 1990. And as you said, we're starting to approach that.
Well, we're starting to approach that 80% threshold. And generally, in the past, that 80% threshold has been met some period of time before the bear market. So it gives you time to get out. And of course, the trouble here is you get some of your best returns in the late stages of a bull market. So no one wants to miss out on that. But no one wants to still be in when it's too late.
I think that's one of the hardest ways to gauge this market is that you get, as you say in your story, at the tail end of a bull market was when you tend to have the strongest returns. Who wants to get out when you're making, when you're so flush in money?
Exactly. And that's why Bank of America came up with this set of different ways to sort of measure whether or not a bear market was imminent. And it was funny, too, the things that turned out to be failures at predicting a bear market. For example, surveys of investor sentiment turn out to be a terrible way to know that a bear market's coming. PE ratios, also valuations, turned out to be a terrible way to time the market.
And these gyrations in the market we're seeing now have the S&P 500 trending toward a second straight monthly decline. And you point out in your story in the Wall Street Journal, it'd be the first back-to-back monthly decline since 2016.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–0:24
2
Does current Wall Street volatility signal a looming bear market?
0:24–1:00
3
What political and economic forces did Streetwise identify behind recent tech sell-offs?
1:00–5:06
4
How has consumer sentiment shifted and what does that mean for market confidence?
5:06–6:36
Speakers
2 identifiedMore from WSJ Your Money Briefing
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