Where to Start?
It’s been nine years, five months and 12 days since the S&P 500 hit a 13-year low on March 9, 2009, the date considered by many to be the start of the equity recovery. Not so fast, say skeptics. According to them, a bull market begins not when the stocks reach a bottom, but after an interval of recovery --like when the market breaches its previous high. Viewed like this, the bull market started on Feb. 19, 2013, when the S&P surpassed an October 2007 high.
“I will not be popping the champagne for the bull market on Aug. 22,” said Jeffrey Hirsch, editor of the Stock Trader’s Almanac. “Everyone’s hung up on the record. It’s more nuanced than that.”
Intraday Rout
Several gripes pertains to how you calculate a 20 percent drop. Adherents of this view note that, fine, the recovery that started two months after Barack Obama took office hasn’t had a 20 percent decline when measured close to close. But it has had one when measured by the highest and lowest levels recorded during the trading day. Between May and October 2011, the S&P 500 plunged 22 percent on an intraday basis. Just because it skirted the definition based on where it landed at 4 p.m. shouldn’t matter to sensible people.
“There is a lot of sloppy data or historical revisionism or both,” said Mark Hulbert, an editor at Hulbert Financial Digest. “People just blithely assume that that bull market started on March 9, 2009. Depending on who you talk to, there have been one or two bear markets that occurred in that period.”
Global Selloff
A 20 percent selloff is painful, but investors can suffer worse fates. So goes a line of thinking that looks at the long, barren period U.S. markets went through around the time of the yuan devaluation in 2015. Even though the drop never exceeded 15 percent, the S&P 500 went through two 10 percent corrections and more than half its members sustained a 20 percent plunge. A gauge of small-cap companies retreated 27 percent between May 2015 and February 2016 while energy companies lost 30 percent in the span.
“I don’t care what a textbook says, that was a bear market,” said Michael Batnick, director of research at Ritholtz Wealth Management. “It wasn’t just that stock prices were going down, but businesses were in trouble, we had an earnings recession and energy prices were collapsing. That to me is a clear sign of a recession.”
This article was provided by Bloomberg News.