Lots of articles out today claiming we are now officially in a bear market, but that’s not really true…at least not yet.
Technically, a bear market is at least a 20% decline from a peak (using closing prices). I’m not a huge fan of that definition since it’s a bit arbitrary, however, it’s widely used so we’ll stick with it to be consistent with the rest of the industry and financial media.
Yes, today, the Dow Jones Industrial Average (DJIA) closed more than 20% lower than it’s all-time high closing price from 2/12/2020. However, the DJIA is only made up of 30 stocks. I have no idea why people are so intent on following the DJIA when it’s a tiny sliver of the U.S. stock universe let alone the global stock universe.
In any case, the S&P 500 still has not technically met the 20% threshold. Neither the global stock market (MSCI All Cap World Index) nor the broader U.S. stock market (Russell 3000) have met that threshold either although all are very close. So, for now, the bull market that began in U.S. stocks back on March 9, 2009 is still in tact.
Today, the bull market turns 3,543 days old…maybe.
We tend to break up the market cycle into bull phases (rising markets) and bear phases (falling markets), which makes sense. However, the demarcation of each, a 20% rise or fall, is completely arbitrary. Why isn’t it 30%, or 21%, or 19%? Why does it have to be 20%? In any case, that’s the most widely used definition so that’s what we’ll use here as well.
However, there is another element that confuses the issue. Although yesterday the S&P 500 set a new all-time intra-day high of $2,873.23, the S&P 500 fell off towards the end of the day so that it still has not closed above the January 26th all-time closing high of $2,872.87 (closed at $2,862.96).
That means, based on closing price, we still do not have confirmation that this is the longest bull market in history as it’s possible January 26th remains the top for the bull market that began in March of 2009 and, therefore, the beginning of the bear market. Another market issue that can only be identified in hindsight. I guess we’ll find out soon enough.