The Tell: These U.S. stock benchmarks are already in a bear market — and the S&P 500 isn’t far behind
The long-running bull market in U.S. stocks may be famously unloved but it won’t be unmourned when it finally goes to that great bovine graveyard in the sky.
A historic decline that’s seen equities tumble sharply since early October has already sent several major benchmarks, including the tech-heavy Nasdaq Composite COMP, +3.19% and the small-cap Russell 2000 RUT, +2.38% into bear territory.
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What is a bear market? While some market arbiters declare a bear market based on intraday prices, Dow Jones Market Data holds that a bear market occurs when an asset closes 20% below its bull-market peak. Based on that criteria, the Dow Jones U.S. Total Market Index DWCF, +2.27% and the Dow Jones Transportation Average are also in bear markets (see table below based on Monday’s closing price levels).
|Index||Recent High||12/24 close||% off recent high||Level needed to enter correction||Level needed to enter bear market||% away from bear market|
|Nasdaq Composite||8108.69||6192.92||-23.6%||7298.72||6487.75||In Bear|
|Russell 2000||1740.75||1266.92||-27.2%||1566.68||1392.60||In Bear|
|DJ U.S. TSM||30390.61||24126.04||-20.6%||27351.55||24312.49||In Bear|
|DJ Transports||11570.84||8637.15||-25.4%||10413.76||9256.67||In Bear|
Meanwhile, the worst Christmas Eve performance in Wall Street history left the Dow Jones Industrial Average DJIA, +2.15% and the S&P 500 SPX, +2.26% on the cusp of bear territory. A bear-market close for the benchmark S&P 500 would put an end to a bull market that is arguably defined as having begun in March 2009 off the low of a market meltdown sparked by the financial crisis.
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It would take a close at or below 2,344.60 to put the S&P in a bear market, a fall of just 0.3% from Monday’s finish. The Dow would take on an ursine cast with a close at or below 21,462.71, a level 1.5% below Monday’s finish.
A close in bear territory for the S&P 500 would mean that the bull run actually ended at its record close on Sept. 20. Bespoke Investment Group, in the tweet below, tallies the performance.
If the S&P 500 falls 0.28% tomorrow, it will end what was the 2nd longest and 2nd strongest bull market on record. The official statline for the bull: 333% price gain, 423% total return, 3,482 days. It was a good run…(not official yet!) $ SPY $ $ pic.twitter.com/3wQI0hBT7x
— Bespoke (@bespokeinvest) December 26, 2018
They note that it would mark not only the second longest (3,482 days), but also the second strongest (a price gain of 333% and a total return of 423%) bull market on record, lagging only the 4,494-day run scored between Dec. 4, 1987, and March 24, 2000. That’s pretty good for a bull that until late 2017 was frequently described as unloved or mistrusted by investors stung by both the dot-com collapse of 2000 and the financial crisis of 2007-09.
Of course, the bull isn’t dead just yet. The S&P 500 and other major indexes struggled to maintain their initial rise but then regained upside momentum to post sharp gains Wednesday, with the Dow rising more than 500 points at its session high and the Nasdaq on track to recoup all of Monday’s decline.