What is a bear market? It is defined as: “a period marked with falling stock prices with a 20% or more downturn from peak to trough over at least a two-month timeframe as well as negative investor sentiment.”
According to an article in the Wall Street Journal on October 23, 2019, titled “Stealth Bear Casts Shadow on U.S. Stocks,” there is data to support the bear market may have started January 26, 2018.
While the S&P 500 index as a whole is not down 20%, the market has been elevated by a small number of stocks. The majority of the companies within the index are down 20% or more.
In U.S. dollars, German stocks and emerging market stocks are down 19% since last January, U.K. down 14% and Japan down about 5%. Small companies (Russell 2000) are down 3.6% and Russell Top 50 Mega Cap index is up only 5% since January 2018.
Looking at this period in sectors, industrials, financials, energy, and material parts of the economy are all down since last January.
It is only a matter of time before the indexes as a whole drop 20%. As the saying goes, it isn’t if there will be a bear market, it is when will there be a bear market.