The Bear Market’s Erasure Nears Completion in Just Under 20 Months
The bear market that sent shockwaves through the global economy has nearly been wiped out, with a remarkable recovery happening in less than 20 months. This surprising turnaround has left many investors taken aback, especially considering the success of the Federal Reserve in engineering a soft landing. As a result, there is now a significant underweight equity exposure across the market, catching investors off guard.
Dennis Davitt, co-manager of the MDP Low Volatility Fund, expressed his astonishment, stating, I’m shocked that the Fed has really pulled off the soft landing and everybody is caught underweight equity exposure. In light of this unexpected development, Davitt has adjusted his positions in preparation for further market upside. He believes that as investors strive to rebalance their portfolios, they will be forced to enter the market and buy, leading to increased demand. However, the longer investors wait, the more challenging it becomes.
The recovery in equity values has been nothing short of remarkable, with nearly $10 trillion restored in just nine months. This resurgence comes as job growth, consumer spending, and corporate earnings exceed expectations, defying the doomsayers. The S&P 500, which hit its trough in October, has surged by an impressive 27% since then. It now stands just 5% away from reclaiming its all-time high of 4,796.56, reached in January 2022.
If the index manages to complete this round trip by September, it will have achieved a full recovery in half the time compared to the previous 12 cycles. Bloomberg data shows that the average time for a full recovery in the past has been twice as long. This rapid bounce back is a testament to the strength and resilience of the current market.
Investors and analysts are closely watching the S&P 500 as it inches closer to its all-time high. The impending achievement has sparked anticipation and optimism among market participants. However, it is important to approach this milestone with caution, as the market remains vulnerable to unpredictable events and potential headwinds.
While some investors are eagerly awaiting the restoration of the S&P 500 to its previous peak, others urge caution and a balanced perspective. They emphasize the importance of analyzing the underlying fundamentals and not solely relying on market indices. Understanding the dynamics of the economy, employment, and corporate performance is crucial to making informed investment decisions.
In conclusion, the bear market’s near-erasure in less than 20 months is an impressive feat that has surprised many market participants. Job growth, consumer spending, and corporate earnings have defied expectations, leading to a significant recovery in equity values. As the S&P 500 approaches its all-time high, investors are cautiously optimistic but emphasize the need for a balanced perspective and careful analysis of underlying fundamentals.
