Ned Davis Research reports that the average bull market since 1900 has produced gains of +81.2% and that the S&P had popped up +79.93% through April 23. Therefore, this bullish phase is long in the tooth.
According to Bespoke Investment Group, there have been 58 corrections of -10% or more in the Standard & Poor's 500 since 1927.
In 25 cases (43%), corrections that reached the -10% mark went on to become a full-fledged bear market, while 57% stopped short of turning truly ugly.
In 25 cases (43%), corrections that reached the -10% mark went on to become a full-fledged bear market, while 57% stopped short of turning truly ugly.
However, Bespoke also warns us that in the 32 instances when the market has dropped as much as this one (as of June 7th the S&P had pulled back -13.7% on a closing basis and -14.68% on an intraday basis) the corrections have a distinct tendency toward continuing.
According to Bespoke’s research, only 7 corrections of this magnitude stopped short of the bear market definition (generally defined as a decline of -20% or more).
According to Bespoke’s research, only 7 corrections of this magnitude stopped short of the bear market definition (generally defined as a decline of -20% or more).
And in the 25 instances in which the decline reached the -20% mark, the average decline of the bear move was -35.5% from top to bottom.
In light of the above, it's prudent to err on the side of capital preservation until the climate improves.
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